Pimco, one of the world’s biggest bond funds with $940bn under management, warns that the record levels of government bond issuance in the US and UK and the end of loose money will put financial markets under intense pressure...
Paul McCulley, managing director of Pimco, said: “For interest rate exposure, or duration, we are currently cutting back in the US and the UK.”
He identifies rising government bond supply and the end of central bank buy-back programmes – which have kept government bond yields lower – as the key reason for reducing exposure to the US and UK.
BlackRock’s European funds have one of its lightest allocations to the US and UK sovereign fixed income markets for two years. Barings has cut investment in the US and UK.
Standard Life Investments has not reduced its portfolio in the US and UK yet, but warns these markets face grave risks...
Tuesday, January 5, 2010
Briathwaite; Fed battles... to exit
Last week the Fed put out for consultation its plan for a term deposit facility , which would pay interest to banks for a fixed period in order to lock up reserves. Term deposits would be one way to tighten policy and to damp the risk of inflation without going as far as increasing interest rates or selling assets...
Braithwaite: Treasury majority stake in GMAC
GMAC is to receive $3.8bn in new government investment via the troubled asset relief programme, the Treasury said , in the final stage of filling a capital hole identified in the "stress tests" on banks earlier this year. The deal brings to a close a busy end to the year for the Treasury's $700bn Tarp scheme, with most elements of the bail-out programme winding down and companies such as Bank of America and Citigroup racing to repay the government and escape restrictions on pay and hiring.
Fannie Mae and Freddie Mac, the rescued mortgage guarantors, are - like GMAC - going the way of deeper state involvement: the Treasury removed a $400bn cap on state aid on Christmas eve.
The Treasury said yesterday that it would convert some of its existing preferred stock in GMAC into common equity, a move that will see the government's ownership increase from 35 per cent to 56.3 per cent. Cerberus, the private equity firm, will be the next biggest shareholder with 14.9 per cent. GMAC has been in talks with regulators and the Treasury for much of the year after abandoning hopes of filling the capital shortfall by raising equity privately...
Fannie Mae and Freddie Mac, the rescued mortgage guarantors, are - like GMAC - going the way of deeper state involvement: the Treasury removed a $400bn cap on state aid on Christmas eve.
The Treasury said yesterday that it would convert some of its existing preferred stock in GMAC into common equity, a move that will see the government's ownership increase from 35 per cent to 56.3 per cent. Cerberus, the private equity firm, will be the next biggest shareholder with 14.9 per cent. GMAC has been in talks with regulators and the Treasury for much of the year after abandoning hopes of filling the capital shortfall by raising equity privately...
Guah: Treasurie: Fannie, Freddie...
Since then the two GSEs have continued to support mortgage finance with Federal Reserve help. It has bought more than $1,000bn of their securities. The Obama administration doubled the amount of funds lined up to invest in Fannie and Freddie to $200bn each in March but deferred detailed discussion of their future to 2010.
However, on December 31 the administration's authority to increase the $200bn per firm without recourse to Congress expires, forcing it to decide whether to increase the amount first.
Fannie and Freddie have already drawn $112bn between them. Barclays Capital estimates Fannie will ultimately need $130bn and Freddie $100bn. But in a stress scenario Fannie would need about $180bn - close to the $200bn limit...
However, on December 31 the administration's authority to increase the $200bn per firm without recourse to Congress expires, forcing it to decide whether to increase the amount first.
Fannie and Freddie have already drawn $112bn between them. Barclays Capital estimates Fannie will ultimately need $130bn and Freddie $100bn. But in a stress scenario Fannie would need about $180bn - close to the $200bn limit...
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