Category: Economy

Daily FX volumes soar to record $2.2 trln in March – CLS

LONDON, April 9 (Reuters) – Average daily foreign exchange trading volumes rocketed 18% year-on-year in March to a record $2.2 trillion, CLS said in a statement on Thursday, as panic over the coronavirus sent currency prices moving wildly.

ClS, a major settler of trades in the foreign exchange market, said five of the 50 largest all-time daily spot volumes came in March, with monthly record volumes in euro/dollar, dollar/yen, sterling/dollar and the U.S. dollar against the Swiss franc and Canadian currency.

Forex trading volumes are closely linked to levels of volatility, as more dramatic market moves encourage more trading.

“The multiple nationwide lockdowns had a significant impact on investor sentiment which led to sharp stock market movements in both directions,” said CLS’s Head of Information Services, Masami Johnstone.

“As a result, the market saw significant demand for dollars as a safe haven. The exchange rates of those currencies that CLS settles against the dollar also experienced the most significant monthly movements of the last decade, an average absolute daily percentage change of 1.14%, almost double the previous monthly high.”

On a monthly basis, FX turnover was up 21% from February 2020. (Reporting by Tommy Reggiori Wilkes; Editing by Saikat Chatterjee)

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UPDATE 1-Brazil central bank eyes up to 1 trillion reais of private sector assets for purchase

(Adds details)

By Jamie McGeever

BRASILIA, April 9 (Reuters) – The value of private sector financial assets potentially available for Brazil’s central bank to buy under new, emergency rules could total almost 1 trillion reais ($197 billion), the bank’s president Roberto Campos Neto said on Thursday.

In a presentation to senators posted on the bank’s website, Campos Neto outlined a range of assets including debentures and mortgage loans that it could potentially buy as part of its new toolkit to ensure financial markets have sufficient liquidity, function smoothly, and provide credit where it is needed.

The 972.9 billion reais list of assets, however, will not include equities or investment funds, according to the presentation.

And the list did not include government bonds, which the constitutional amendment awaiting final congressional approval will authorize, effectively paving the way for “quantitative easing”, or QE.

Campos Neto noted that the scramble for liquidity in times of crisis affects the cost of borrowing for even the strongest companies. Central bank and government intervention can have positive repercussions “for the entire system,” he said.

“Central banks in emerging countries may need to act as the ‘buyer of last resort’ – several are taking steps in this direction,” Campos Neto said.

Campos Neto reminded senators that the central bank’s measures to provide liquidity to financial markets and improve the flow of credit throughout the economy come to 1.2 trillion reais, or 16.7% of gross domestic product.

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Vancouver mayor asks B.C. for $200 million to offset COVID-19 economic hit

Vancouver Mayor Kennedy Stewart is asking the province for an emergency grant of $200 million to help offset the likely major financial hit when the coronavirus pandemic begins to end.

Despite cost-cutting measures such as temporarily laying off 1,500 municipal employees, Stewart told a news conference on Wednesday that there is still a “serious gap” in funding at City Hall.

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He said he anticipates a 50-per-cent drop in tax revenue between March and May, adding that governments cannot apply for the federal wage subsidy.

In a worst case scenario — a recovery period stretching to end of December — Stewart said he expects a financial hit of about $189 million, equivalent to a 24-per-cent increase in property taxes.

“Slow economic recovery in Vancouver means slower recovery throughout B.C.,” he said.

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Anxiety grows as Colorado small businesses desperately apply to banks for federal loan rescue

For five days, Steven Marks, who runs a counseling practice, has waited anxiously to apply for a loan under the new federal Paycheck Protection Program. Vectra Bank Colorado, his commercial bank, still hadn’t opened its online loan application site as other banks pumped out billions of dollars in emergency loans.

“The guidance they gave us is it will be first-come, first-served,” he said. “We are waiting and we can’t apply. The funds might not be available,” he said.

Like someone treading water in the ocean after a big ship has capsized, he worries all the rescue boats will fill up and zoom off. He can’t help but have a sinking feeling.

“I can sympathize very much with small businesses,” said Don Childears, CEO of the Colorado Bankers Association. “They can see the life preserver, but they can’t reach it.”

Congress has made $349 billion available for loans to small businesses that are struggling financially because of the outbreak of COVID-19. Small businesses with fewer than 500 employees can borrow up to 2.5 months of payroll. If they use at least 75% of the funds for employee expenses, the loan is forgivable.

Nonprofits and churches can borrow money through the program as well. Businesses backed with private equity can’t, and the question is still open on agricultural businesses. Come Friday, sole proprietors and gig economy workers can apply, setting off another wave of demand.

As of 2 p.m. on Tuesday, the Paycheck Protection Program had issued $70 billion in loans to 275,000 borrowers through 3,200 lenders nationally, Childears said, citing Small Business Administration numbers. To put that in perspective, the SBA backed $28 billion in loans all of last year. And loan volumes are expected to go up as more banks join the program.

Program rules came down only a few hours before loan applications opened up on Friday. Some banks rushed forward, overcoming concerns they might make bad loans that the SBA wouldn’t back, while others chose to wait and get guidance.

“We wanted to do it right,” said Bruce Alexander, president and CEO of Vectra Bank Colorado. “My feeling is sometimes you have to go slow to go fast. We are taking an extra couple of days to make sure we had the proper information.”

The bank’s commercial loan officers have been reaching out to customers needing help and processing loans manually for them. The bank has processed PPP loans, Alexander said, but not at the volume that the automated system will permit.

“All of us in the industry are participating in the program. Our job is doing everything we can to save our small-business customers,” said Alexander, noting the level of frustration is high on many fronts.

Marks said he has banked with Vectra Bank since 2004 and has had a good relationship with the bank. But he has been frustrated with notices on the bank’s website saying that an online application portal was imminent. The site promised to go live Tuesday afternoon, which it appears to have done.

“What I am concerned about is that all of the customers of the bank will go in at once and crash the site,” said Marks, who owns Front Range Counseling, which has two offices.

Borrowers are encouraged to stick with the banks they already have a relationship with. Switching to a new bank will require identity verification and documenting payroll expenses and other financial information. That will prolong a loan approval.

But some businesses have no choice but to start swimming toward other banks. Colorado’s largest bank, Wells Fargo, has already reached its lending limit of $10 billion because of a regulatory cap on how much it can grow.

Wells Fargo made $83 million in 7(a) SBA loans last year in the state, nearly as much as the next three largest SBA lenders made combined. Unless regulators provide a reprieve, thousands of its Colorado customers may find themselves desperately reaching out to competitors, who are desperately trying to rescue their own customers.

Given that the loans will pay only 1% interest, there really isn’t a profit motive to bring in outsiders. But there is a strong financial incentive to rescue customers.

“If you can help that business stay alive, you have minimized your own losses as a lender. It makes sense,” Childears said.

About a third of banks in the state were active SBA lenders and have pushed out PPP loans, he said. Given the program initially had a 16-point list of potential exposure, they took a risk. That list has since been narrowed to three areas of exposure, encouraging more banks to lend. Basically, if a borrower lies to a lender, that customer will be held liable.

Another third of the banks in the state have SBA approval to make loans but weren’t active lenders. It took longer to get them into the SBA loan approval system, which crashed for several hours on Monday because of heavy demand. The final third didn’t have approval in the SBA system and are working to get it.

“None of us know how fast this $350 billion could be consumed. The money will not be sufficient for the demand that seems to be out there,” Childears said.

But there’s good news on that front. U.S. Sen. Susan Collins, R-Maine, tweeted Tuesday that the administration has agreed to support her push to add another $250 billion in funding to the Paycheck Protection Program.

And in another important step, the Federal Reserve said Monday it would soon release details on a program to buy up the PPP loans that banks are making. Banks could offload their loans and go back out and rescue another round of businesses.

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UPDATE 2-Trump administration, U.S. Congress eye quick approval of more small business aid

(Adds details, McConnell quote)

By Richard Cowan and David Lawder

WASHINGTON, April 7 (Reuters) – The Trump administration on Tuesday was preparing to ask Congress for an additional round of emergency loans to help small businesses hobbled by the coronavirus pandemic, and Senate Majority Leader Mitch McConnell said he hoped for approval this week.

“It is quickly becoming clear that Congress will need to provide more funding or this crucial program may run dry,” McConnell, a Republican, said in a statement. He added that he would work with Treasury Secretary Steven Mnuchin and Senate Democratic Leader Chuck Schumer on the initiative with the goal of winning Senate approval on Thursday.

It was not immediately clear whether Schumer and House of Representatives Speaker Nancy Pelosi, a Democrat, would embrace this timetable as they have been pushing for a broader set of measures for a fourth coronavirus-response bill since early March.

Republican Senator Marco Rubio, who chairs a Senate Small Business committee said in a statement that a $349 billion forgivable loan program, which was enacted on March 27, already needed a second infusion in the range of $200 billion to $250 billion.

An aide to Rubio said a formal request by the Trump administration could come as soon as Tuesday.

Mnuchin in recent days has been hinting at the need for Washington to provide additional aid to small businesses on the heels of the historic $2.3 trillion economic stimulus program enacted into law on March 27 that contained the initial round of small business loans.

Action this week by the Senate would indicate the depth of the crisis for small enterprises that have been shuttered because of the coronavirus outbreak.

McConnell’s backing also marked a change in attitude. He warned in an April 1 interview with the Washington Post that Pelosi should not undertake a “premature” fourth stimulus bill related to the pandemic.

“There is a critical need to supplement the (loan) fund to ensure America’s more than 30 million small businesses will be able to access this critical lifeline,” Rubio said in a statement.

Restaurants and hotels are among businesses hardest hit by the coronavirus outbreak, with many of them shuttered.

The loan program aims to encourage small enterprises to keep their employees on staff and to help them pay their rent, mortgages, utilities and other overhead costs.

Pelosi on Monday told rank-and-file members of her Democratic majority that House committees were working on a bill that could top $1 trillion to augment the $2.3 trillion measure enacted last month.

With McConnell’s announcement for a separate vote on small business aid, it was not yet clear whether the Democratic-controlled House would follow suit and quickly approve that as a standalone measure. (Reporting by Richard Cowan, Lisa Lambert David Lawder, David Morgan, Susan Cornwell and Patricia Zengerle; Editing by Doina Chiacu and Alistair Bell)

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China's volume-weighted average of overnight repo falls to record low

SHANGHAI, April 7 (Reuters) – China’s primary money market rates fell sharply on Tuesday, with the overnight borrowing cost hitting a record low as liquidity in the banking system remained ample and the central bank announced easing measures to combat coronavirus disruption.

Interbank borrowing costs plunged across the board. The volume-weighted average rate of the benchmark overnight repo fell to 0.7865% in afternoon trade, the lowest level since the data has been available.

Traders attributed the declines in the interbank rates to the central bank’s decision last Friday to lower the interest rate on financial institutions’ excess reserves for the first time since the global financial crisis.

A trader at a foreign bank said the interest rate on excess reserves served as the bottom of China’s interest rate corridor. Cutting such a rate should help lower financing costs and encourage commercial banks to lend.

On the same day, the People’s Bank of China also said it was cutting the amount of cash that small banks must hold as reserves, releasing around 400 billion yuan ($56.69 billion).

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German yields rise as joint pandemic response expected at Eurogroup meeting

* Eurogroup tipped to agree joint debt issuance on Tuesday

* German bond yields rise 6-9 bps across the curve

* Risk assets rally as COVID-19 death toll increase slows

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

By Abhinav Ramnarayan

LONDON, April 7 (Reuters) – German government bond yields rose on Tuesday with euro zone finance ministers due to meet later in the day to discuss a joint response to help member countries deal with the economic impact of the novel coronavirus.

Demand for safe-haven Bunds has softened in recent days as the number of new cases and the increase in the death toll from COVID-19 has slowed in several countries including Italy and Spain.

The Eurogroup of finance ministers within the single currency bloc are scheduled to meet later on Tuesday, and analysts expect joint action to help prop up the economies of member states – possibly including even so-called coronabonds.

“Investors have recently been detecting growing public support for the concept of coronabonds in European Commission and ECB circles,” said DZ Bank analyst Daniel Lenz, adding that German ECB Executive Board member Isabel Schnabel was among those who appeared to voice support.

Germany has traditionally opposed the idea of joint debt issuance, being unwilling to effectively back the debt of lower-rated and poorer Southern European countries. Key figures in the German government are yet to be convinced, media reports suggest.

But the idea has gained traction in light of the recent spread of the new coronavirus, which has resulted in more than 28,000 deaths in Italy and Spain alone, the two worst-hit countries.

“In this market environment, Bund yields moved upwards, above all at the long end of the maturity curve,” Lenz said.

German government bond yields rose 6-9 basis points across the curve, with the long-dated 30-year bond up 9 bps at 0.05%, its highest since March 27.

Italian yields were flat to a touch lower on the day, with the benchmark 10-year borrowing costs 2 bps lower at 1.52%, while the closely-watched Italy/Germany 10-year bond yield spread tightened 8 bps.

Risk assets rallied elsewhere, with European stocks opening up higher and corporate bond markets also strengthening on the day. Cyprus, one of the lower-rated countries in the bloc, is marketing a seven-year and 30-year bond issuance, according to IFR, Refinitiv’s capital markets publication.

However, ING analysts warned that the Eurogroup “has the potential to spoil the party early” if it does not agree a package.

Expectations are for the European Union, the European Investment Bank and the European Stability Mechanism to all be part of the joint borrowing programme; and any debt issued by these institutions can be supported by the ECB’s bond-buying scheme.

“A rare display of unity and the prospect of ECB support should add to improving sentiment in the short term, and the prospect additional borrowing should help euro zone yields higher,” the ING analysts said in a note. (Reporting by Abhinav Ramnarayan; Editing by Pravin Char)

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UPDATE 1-S&P lowers Brazil sovereign rating outlook to 'stable'

(Adds detail, comments)

By Jamie McGeever

April 6 (Reuters) – S&P Global Ratings lowered its outlook on Brazil’s sovereign debt to ‘stable’ on Monday, citing an expected doubling of the government’s budget deficit this year due its significant spending to soften the economic blow from the coronavirus.

S&P had told Reuters last week it was reassessing its BB- rating and positive outlook, and on Monday it acted on the outlook.

It expects the nominal budget deficit to double to 12% this year, the gross national debt to rise by almost 10 percentage points to 85% of gross domestic product, and net debt to rise by a similar amount to 66% of GDP.

“We expect the fiscal deficit and debt figures to deteriorate throughout 2020, driven by higher spending,” S&P said in a note.

“Revenues would also decline due to economic contraction, tax relief related to COVID-19, and declining oil royalties because of low crude oil prices,” it said.

The change comes barely three months after S&P raised the outlook on Brazil to “positive”. The BB- non-investment grade, or so-called ‘junk’, rating was maintained.

The Brazilian government’s package of measures to combat the coronavirus crisis amounts to around 3.5% of GDP, according to S&P. This is “significant” when compared to the fiscal measures taken by other emerging market countries so far: Russia, 0.3% of GDP, Mexico 0.7%, India 0.1%, and Argentina 1%.

S&P cited “considerable” uncertainties surrounding Brazil’s economic and fiscal road ahead, notably political tensions in Brasilia which could hamper the government’s economic and fiscal reform agenda.

But it also said it expects the coronavirus-related shock to be temporary, and that the government’s commitment to its fiscal and economic reform agenda once the crisis is over will be strong. (Reporting by Jamie McGeever; Editing by Stephen Coates)

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CDL steps up rental rebates for tenants; PropNex rolls out support for property agents

SINGAPORE – One of Singapore’s largest commercial landlords, City Developments Limited (CDL), is stepping up its help to retail tenants struggling with the fallout from the coronavirus outbreak, as firms like PropNex roll out measures for other stakeholders in the property industry.

CDL said on Monday (April 6) it will provide its retail tenants rental rebates of 100 per cent in April and 50 per cent in May. More support may be rolled out progressively after May as CDL monitors the situation closely. It has already given out rental rebates “in a targeted manner” to qualifying retail tenants in March.

Altogether, CDL has so far committed more than $17 million in property tax and rental rebates to help its office and retail tenants cope with the temporary business closures and disruptions from Covid-19, it said in its media release.

This amount includes – but also exceeds – the full quantum of the government’s enhanced property tax rebates to be passed on to CDL’s tenants.

Its announcement comes ahead of a Parliament sitting on Monday afternoon, when new legislation will be introduced to ensure landlords pass on the property tax rebates in full to their tenants. The enhanced rebates comprise the 100 per cent property tax rebate for qualifying commercial properties and 30 per cent for businesses in other non-residential properties such as offices and industrial properties.

CDL said on Monday tenants facing severe cash flow issues will be given more flexibility in rental payments.

Said the group: “As the Covid-19 situation continues to evolve, with new regulations being put in place by the authorities, close engagement with tenants to understand their operating challenges is critical during this uncertain and difficult period. CDL is reviewing tenants’ requests on a case-by-case basis and will work hand in hand with tenants to support them and provide further assistance.”

CDL is landlord to a total of 426 retail tenants. They come from five malls, eight retail properties where the group owns strata-titled units and an additional four commercial properties with retail space. In terms of the trade mix, 36 per cent are in the food and beverage sector.

Group CEO Sherman Kwek said: “We stand united alongside our tenants in these unprecedented times. While the Covid-19 situation looks likely to be prolonged and the authorities have just imposed stricter measures, nevertheless we must remain positive in our outlook and help one another to tide through this difficult period.”

PropNex Realty, meanwile, announced on Monday a support package for its 8,500 real estate agents, as well as a $750,000 donation, comprising $250,000 for the needy in the community and frontline workers in the virus outbreak and $500,000 to the Community Chest.

CEO Ismail Gafoor said that in light of the “circuit breaker” measures that kick in on Tuesday, there will be further restrictions on the conduct of real estate business and the company was concerned for its salespersons’ cash flow situation.

To this end, PropNex has rolled out a plan, whose highlight is a $25 million advance commission scheme. Under this, property agents for new project launches can apply for the early release of their commissions, interest free, capped at $10,000 per person. Developers generally take three to six months to release the commissions. They can also apply for the early release of their commissions for eligible resale transactions, capped at $1,000 per transaction and limited to $10,000 per person.

The firm will also make advance payments on its pension fund and management fees for team leaders, waive or subsidise certain training fees and pass on rental rebates to its agents in the form of discounted or free room bookings.

The company is also appealing to otheer agencies on behalf of their agents to lower business costs.

It has written to the Professional Indemnity Insurance provider to request for a discount on the salesperson insurance premium.

It has also written to the Council of Estate Agencies, appealing for a total waiver of the $283.50 fee for agents to renew their licence next year, and for deferment of their Medisave top ups for 2020.

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Dubai imposes two-week lockdown to fight coronavirus outbreak

CAIRO, April 4 (Reuters) – Dubai announced a two-week lockdown starting on Saturday at 8 p.m. (1600 GMT) to disinfect the emirate and contain the spread of the coronavirus, state news agency WAM said, the citing Supreme Committee of Crisis and Disaster Management.

Dubai warned that mobility would be restricted and legal action taken against violators, WAM said, adding that supermarkets and pharmacies as well as food and drug delivery services would continue to operate as normal.

The oil-rich federation has reported an uptick in coronavirus cases with several hundred people diagnosed since April 1 and a total number of cases of 1,505.

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