Home » Posts tagged 'fitch' (Page 2)
Tag Archives: fitch
Greek Capital Controls To Remain For Months As Germany Pushes For Bail-In Of Large Greek Depositors
Greek Capital Controls To Remain For Months As Germany Pushes For Bail-In Of Large Greek Depositors
Two weeks ago we explained why Greek banks, which Greece no longer has any direct control over having handed over the keys to their operations to the ECB as part of Bailout #3’s terms, are a “strong sell” at any price: due to the collapse of the local economy as a result of the velocity of money plunging to zero thanks to capital controls which just had their 1 month anniversary, bank Non-Performing Loans, already at €100 billion (out of a total of €210 billion in loans), are rising at a pace as high as €1 billion per day (this was confirmed when the IMF boosted Greece’s liquidity needs by €25 billion in just two weeks), are rising at a pace unseen at any time in modern history.
Which means that any substantial attempt to bailout Greek banks would require a massive, new capital injection to restore confidence; however as we reported, a recapitalization of the Greek banks will hit at least shareholders and certain bondholders under a new set of European regulations—the Bank Recovery and Resolution Directive—enacted at the beginning of the year. And since Greek banks are woefully undercapitalized and there is already a danger of depositor bail-ins, all securities that are below the depositor claim in the cap structure will have to be impaired, as in wiped out.
Now, Europe and the ECB are both well aware just how insolvent Greek banks are, and realize that a new recap would need as little as €25 billion and as much as €50 billion to be credible (an amount that would immediately wipe out all existing stakeholders), and would also result in a dramatic push back from local taxpayers. This explains why Europe is no rush to recapitalize Greece – doing so would reveal just how massive the funding hole is.
…click on the above link to read the rest of the article…
Canadian Mortgage Insurer Tells US Hedge Funds Why Canada’s Housing Bubble Is Immortal. Hilarity Ensues
Canadian Mortgage Insurer Tells US Hedge Funds Why Canada’s Housing Bubble Is Immortal. Hilarity Ensues
Home prices in Canada’s two largest metro areas have been red-hot for years. In May, the average selling price for all types of homes in the Greater Toronto Area jumped 11% from a year ago to C$649,600 on a 6% increase in sales. In Greater Vancouver, the composite benchmark price for all homes rose 9.4% to C$684,400 on a 23% increase in sales.
But these overall price changes paper over what’s happening with detached homes,whose prices soared 14% to C$1,104,900 in Vancouver and 18% to C$1,115,120 in Toronto.
Already last summer, Fitch fretted about overvaluation in housing and the high debt burden relative to disposable income of Canadian households. At about the same time, seven in ten mortgage lenders expressed concerns in a poll by FICO that home prices were in a “bubble” that could burst any time. Last October, the Bank of Canada thought that the housing bubble could threaten Canada’s financial stability.
This January, Deutsche Bank estimated that homes in Canada were 63% overvalued. In March, the IMF warned that high household debt levels and the “overheated housing market” are two risks it would “need to keep an eye on.” In April, the Economistdetermined that home prices in Canada were overvalued by 35% when compared to incomes, and 89% when compared to rents.
Now hedge funds are trying to engineer ways to short the Canadian housing market one way or the other, because surely this would be another “short of a lifetime.”
Maybe they’re right: beyond Toronto and Vancouver, the housing market is already drifting lower.
…click on the above link to read the rest of the article…
Fitch Downgrades Japan To A From A+
Fitch Downgrades Japan To A From A+
With the USDJPY’s ascent to 125, 150 and higher having seemingly stalled just under 120, with concerns that the BOJ may not monetize more than 100% of its net debt issuance suddenly surfacing, the BOJ and the Nikkei would take any help they could get. They got just that an hour ago when Fitch downgraded Japan’s credit rating from A+ to A, citing lack of sufficient structural fiscal measures in FY15 budget to replace deferred consumption tax increase.
But don’t panic, Fitch says: it expects Japan’s gross debt to GDP ratio to “stabilize around 250% of GDP in 2020.” Perhaps the fact that Fitch did not predict the complete collapse of the Japanese economy is why the USDJPY spiked then promptly reversed and is trading almost unchanged, the same as Nikkei futures.
See, if Fitch had predicted a stabilization level of 2,500%, then Japanese stocks would be limit up today. Because remember: in the New Normal, only a completely socio-economic collapse and terminal currency devaluation leads to limit up in regional stock markets.
As to what really prompted the downgrade, which the BOJ was hoping would lead to a far more negative reaction for the JPY, here it is:
Full Fitch note:
Fitch Ratings-Hong Kong-27 April 2015: Fitch Ratings has downgraded Japan’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to ‘A’ from ‘A+’.
- The issue ratings on Japan’s senior unsecured foreign and local currency bonds are also downgraded to ‘A’ from ‘A+’.
- The Outlooks on the Long-Term IDRs are Stable.
- The Country Ceiling is downgraded to ‘AA’ from ‘AA+’ and the Short-Term Foreign Currency IDR is downgraded to ‘F1’ from ‘F1+’.
KEY RATING DRIVERS
The downgrade of Japan’s IDRs reflects the following key rating drivers:-
…click on the above link to read the rest of the article…
Canada Mauled by Oil Bust, Job Losses Pile Up – Housing Bubble, Banks at Risk
Canada Mauled by Oil Bust, Job Losses Pile Up – Housing Bubble, Banks at Risk
Ratings agency Fitch had already warned about Canada’s magnificent housing bubble that is even more magnificent than the housing bubble in the US that blew up so spectacularly. “High household debt relative to disposable income” – at the time hovering near a record 164% – “has made the market more susceptible to market stresses like unemployment or interest rate increases,” it wrote back in July.
On September 30, the Bank of Canada warned about the housing bubble and what an implosion would do to the banks: It’s so enormous and encumbered with so much debt that a “sharp correction in house prices” would pose a risk to the “stability of the financial system” [Is Canada Next? Housing Bubble Threatens “Financial Stability”].
Then in early January, oil-and-gas data provider CanOils found that “less than 20%” of the leading 50 Canadian oil and gas companies would be able to sustain their operations long-term with oil at US$50 per barrel (WTI last traded at $47.85). “A significant number of companies with high-debt ratios were particularly vulnerable right now,” it said. “The inevitable write-downs of assets that will accompany the falling oil price could harm companies’ ability to borrow,” and “low share prices” may prevent them from raising more money by issuing equity.
In other words, these companies, if the price of oil stays low for a while, are going to lose a lot of money, and the capital markets are going to turn off the spigot just when these companies need that new money the most. Fewer than 20% of them would make it through the bust.
…click on the above link to read the rest of the article…
