Category Archives: Debt

Americans Are Starting to Miss More Mortgage Payments

11-Apr (YahooFinance) — For several quarters, lenders have been reporting low and falling delinquency rates for credit card, mortgage and auto loan borrowers, and that positive trend has opened up credit products to consumers with lower credit scores.

That may be starting to shift.

A greater share of mortgages were 30 to 59 days past due in the fourth quarter of 2013 than at the same time in 2012, and bank risk professionals expect credit card and auto loan delinquencies to follow suit.

…In a survey by FICO of bank-risk professionals, nearly half said they expect delinquency rates on all consumer loans to rise to their highest levels since late 2011. For credit cards, 44% of respondents expected delinquencies to increase, and 35% predicted auto loan delinquencies would jump.

[source]

Posted in Debt |

US budget gap narrowed to -$37 bln in Mar, well inside expectations of -$80.0 bin, vs -$193.5 bin in Feb and -$107 bin a year ago.

Posted in Debt, Economic Data |

National Debt: $17,501,576,037,738.02

Posted in Debt |

Who holds and prints the $100trn-worth of global debt?

09-Mar (Financial Times) — The Bank for International Settlements has a fascinating section in its latest quarterly report drawing attention to the amount of debt globally, which has soared since the turn of the millennium from under $40trn to hit a whopping $100trn towards the end of 2012.

Unsurprisingly, governments have been among the busiest bond issuers, with the amount of public debt rising by 80 per cent since the start of the financial crisis in mid 2007.

[source]

Posted in Debt |

Putin Adviser Urges Dumping US Bonds In Reaction to Sanctions

04-Mar (RIA Novosti) – An adviser to Russian President Vladimir Putin said Tuesday that authorities would issue general advice to dump US government bonds in the event of Russian companies and individuals being targeted by sanctions over events in Ukraine.

Sergei Glazyev said the United States would be the first to suffer in the event of any sanctions regime.

“The Americans are threatening Russia with sanctions and pulling the EU into a trade and economic war with Russia,” Glazyev said. “Most of the sanctions against Russia will bring harm to the United States itself, because as far as trade relations with the United States go, we don’t depend on them in any way.”

Glazyev noted that Russia is a creditor to the United States.

“We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner,” he said. “We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market.”

[source]

PG View: Fear not, the Fed has a long history of stepping in to absorb excess supply when necessary. The Russian holdings of $200 bln are a mere bag-of-shells, just about three-weeks of QE at the present pace.

Posted in Currency Wars, Debt, Geopolitical Risks |

Testing times for China’s foreign exchange reserves

18-Feb (China Daily) — China’s foreign exchange reserves, the largest in the world, reached a record $3.82 trillion last year.

Since China’s reserves started accumulating more than a decade ago, the increase has been widely regarded as an encouraging and beneficial development. With China gradually becoming the “world’s factory” and posting an increasing trade surplus in the past decade, Chinese reserves ballooned. During that period, the Chinese felt positive about growing reserves. But now they are feeling increasingly nervous about the situation.

With the rolling out of the three stages of quantitative easing, the Chinese realized with great disappointment that the real value of their reserves had depreciated considerably due to the United States’ monetary policy, which is beyond the Chinese government’s control.

The US government budget limit problem last October once again highlighted the possibility of a US default, which would not only affect its creditworthiness and the cost of US government financing but also the value of China’s reserves and the confidence of the country, which is the largest investor in US government securities.

Not only would China lose due to the reduced value of its investment in US Treasury notes and related assets, but it also could be criticized for allowing the US government to maintain low interest rates and release unprecedented amounts of liquidity into the global economy.

[source]

PG View: You think their disappointed now? I fear they haven’t seen anything yet…

Posted in Central Banks, Debt, investments, Monetary Policy |

In 2013 The Fed Bought 150% More Treasurys Than All Foreigners Combined

19-Feb (ZeroHedge) — Now that we have the full history of foreign Treasury purchases in 2013, we know the following: in December 2012 total US paper held by foreigners was $5,573.8 billion; one year later it rose to $5.794.9 billion or a $221 billion increase. So how does this look in the context of QE? In the past year, courtesy of the Fed’s $1 trillion in TSY and MBS purchases, Ben Bernanke purchases some $552 billion in Treasurys, or about 150% more than all foreigners combined! Suddenly the need for MyRA is becoming all too clear…

[source]

Posted in Central Banks, Debt, Monetary Policy, QE |

Capital Flows

18-Feb (Across the Curve) — This is an analysis of the monthly Treasury report on international capital flows via Gennadiy Goldberg at TD Securities. China was a huge seller and foreigners were net sellers of agencies and corporates and equities.

Via TDSecurities:

The December TIC capital flows report showed net long-term outflows of $45.9B from US securities – the largest monthly outflow since June 2013.

…Foreign official flows showed very strong net selling in December, with China shedding an enormous $47.8B and Japan selling $3.9B. It is worth highlighting that Caribbean accounts (a proxy for hedge funds) saw no change in Treasury holdings during the month, suggesting that Treasuries were largely well-positioned to receive the December tapering announcement.

[source]

Posted in Debt, investments |

Household Borrowing Rises Most in Six Years in NY Fed Report

18-Feb (Bloomberg) — Consumer debt in the U.S. rose last quarter by the most in more than six years as Americans borrowed to buy homes and cars and to pay for education, according to a report by the Federal Reserve Bank of New York.

Household debt increased 2.1 percent, or $241 billion, to $11.52 trillion, the biggest gain since the third quarter of 2007, the report showed. The level of debt last quarter was $180 billion higher than a year earlier.

“After a long period of deleveraging, households are borrowing again,” Wilbert van der Klaauw, senior vice president and economist at the New York Fed, said in a statement.

[source]

Posted in Debt |

After GOP filibuster bid, Senate votes to suspend Treasury’s borrowing limit

12-Feb (Washington Post) — After a dramatic vote, the Senate cleared the critical 60-vote threshold Wednesday that allowed for passage of legislation to suspend the Treasury’s borrowing limit.

The cliffhanger vote was scheduled for 15 minutes, but it lasted an hour. It ended when Senate Minority Leader Mitch McConnell (R-Ky.) and his leadership team voted to end a potential GOP filibuster, casting votes that left them exposed to attacks from conservative opponents.

After the filibuster threat was choked off, the Senate approved the debt ceiling legislation on a party-line vote, 55 to 43, sending it on to President Obama for his signature, ensuring that the Treasury will not default on more than $17 trillion in federal debt.

[source]

PG View: Allowing our Representatives in Washington to borrow and spend for the next year without the check of a debt ceiling is like turning the keys to the candy store over to the children.

Posted in Budget/Debt Ceiling Crisis, Debt |

Treasury auctioned a record $84 bln of 3- & 6-month bills today, along with $50 bin of 72-day cash management bills.

Posted in Debt |

Clock running on debt ceiling

10-Feb (Politico) — It’s getting close to crunch time.

There have been conversations between Speaker John Boehner’s office and the White House on lifting the debt limit, but no negotiations over a package, according to sources familiar with the talks.

Time is running short for Congress to raise the nation’s borrowing limit — the Treasury Department says it will run out of spending authority by Feb. 27. Congress recesses this week on Wednesday, then takes a week off and comes back Feb. 25 — just two days ahead of the deadline.

[source]

Posted in Budget/Debt Ceiling Crisis, Debt |

Ratings Agency S&P Downgrades Turkey Rating Outlook to Negative From Stable

07-Feb (MoneyNews) — Standard & Poor’s cut its outlook on Turkey’s ratings to negative from stable on Friday, saying that it saw risks of a hard economic landing and that the country’s policy environment was becoming less predictable.

A corruption investigation shaking Prime Minister Tayyip Erdogan’s government along with sharp falls in the lira currency and rising inflation have raised concerns about political and economic stability in the run-up to elections this year.

“Turkey appears to have suffered an unanticipated erosion of institutional checks and balances and governance standards,” Standard & Poor’s said in a statement, citing in particular concerns about the independence of the central bank.

[source]

Posted in Central Banks, Debt |

Moody’s downgrades Puerto Rico GO debt rating two notches to ‘junk’ status

07-Feb (Reuters, via CNBC) — Moody’s Investors Service downgraded Puerto Rico’s general obligation debt rating to junk status on Friday, days after S&P made the same move on the island commonwealth’s debt.

“The problems that confront the commonwealth are many years in the making, and include years of deficit financing, pension underfunding, and budgetary imbalance, along with seven years of economic recession,” Moody’s said, adding that the island’s challenges meant it no longer merited an investment-grade rating.

Moody’s on Friday cut Puerto Rico’s credit rating to junk status, citing concerns about the fiscally challenged U.S. territory’s weak growth and ability to access capital markets.

[source]

Posted in Debt |

Treasury pulls back as U.S. hits debt limit again

07-Feb (USAToday) – The Treasury Department stopped issuing securities to state and local governments at noon Friday, instituting the first of what will likely be several steps to stay under the debt limit enacted by Congress.

Under the budget deal passed by Congress last November, the debt limit was temporarily suspended — but only through Friday. Beginning Saturday, the debt limit will be reset to its current level, about $17.2 trillion.

Congress has voted to raise the debt ceiling three times since 2011. But it’s missed the deadline each time, forcing the Treasury Department to use what it calls “extraordinary measures” to avoid hitting the debt ceiling.

[source]

Posted in Debt |

US National Debt: $17,281,222,665,378.63

Posted in Debt |

Emerging markets more vulnerable than ever to Fed tightening, warns BIS

By Ambrose Evans-Pritchard
05-Feb (Telegraph) — Emerging markets may be even more vulnerable to an interest rate shock today than they were during the East Asia crisis in 1998, the Bank for International Settlements (BIS) has warned.

The Swiss-based watchdog said there had been a “massive expansion” in borrowing on global bond markets by banks and companies in developing countries, leaving them exposed to “powerful feedback” risks as borrowing costs rise in the West.

“The deeper integration of emerging market economies into global debt markets has made emerging market bond markets much more sensitive to bond market developments in the advanced economies,” the BIS said in a working paper.

…The BIS report said debt issuance in emerging markets has been so great that a “sudden stop” could overwhelm central banks and pose a risk to financial stability. The twin effects of falling currencies and rising bond yields may feed on each other in a vicious circle.

[source]

Posted in Debt |

EU Said to Weigh Extending Greek Loans to 50 Years

05-Feb (Bloomberg) — The next handout to Greece may include extending the maturity on rescue loans to 50 years and cutting the interest rate on some previous aid by 50 basis points, according to two officials with knowledge of discussions being held by European autorities.

The plan, which will be considered by policy makers by May or June, may also include a loan for a package worth between 13 billion euros ($17.6 billion) and 15 billion euros, another official said. Greece, which got 240 billion euros in two bailouts, has previously had its terms eased by the euro zone and International Monetary Fund amid a six-year recession.

“What we can do is to ease debt, which is what we have done before through offering lower interest or extending the maturity of loans,” Dutch Finance Minister Jeroen Dijsselbloem, who heads the group of euro finance chiefs, said yesterday on broadcaster RTLZ. “Those type of measures are possible but under the agreement that commitments from Greece are met.”

[source]

PG View: So the EU seeks to ‘ease’ Greece’s debt burden by allowing them to go deeper into debt, but extending the term?

Posted in Debt, European Debt Crisis |

Treasury’s Lew warns that U.S. default could happen quickly

03-Feb (Reuters) — The Obama administration warned on Monday it could start defaulting on the government’s obligations “very soon” after it runs out of room to borrow under a legal cap on public debt.

Washington is due to reinstate a limit on its borrowing at the end of this week and Treasury Secretary Jack Lew said the administration can use accounting measures to stay under the new cap until the end of February.

After that time, “very soon it would not be possible to meet all of the obligations of the federal government,” Lew said at an event hosted by the Bipartisan Policy Center, a prominent Washington think tank.

U.S. politicians now partake in a regular dance around the country’s so-called debt limit. First, Congress authorizes spending that outstrips tax receipts. Then lawmakers balk over whether to OK enough borrowing to pay the bills. A rancorous debate ensues over putting public finances on a stable path.

[source]

PG View: The only thing that’s stable is the perpetual rise in our national debt…

Posted in Debt |

Deutsche Bank: “We’ve Created A Global Debt Monster”

03-Feb (ZeroHedge) — Two observations on the latest thoughts by Jim Reid (DB’s best strategist by orders of magnitude):

He is far more concerned by what is going on in China than any of the other noise around the world. And rightfully so. As we first showed a few months ago, the money creation in China puts what all the other global central banks do to shame. Any slowdown in this credit creation and the wheels have no choice but to fall off, which also explains why even the tiniest default in this $9 trillion economy will be bailed out as it would risk an outright “flow” collapse.

The Fed came, saw, and after realizing the mess it created with tapering – which can never be priced in now that the market is terminally addicted to the Fed’s liquidity injections – will soon do what we have said since the May 2013 “taper tantrum” would happen – untaper, and resume bailing out everyone.

[source]

Posted in Central Banks, Debt, Monetary Policy |

$2 Billion Deal in Works for Puerto Rico

22-Jan (New York Times) — Puerto Rico, which is battling a financial crisis of high unemployment and a crushing debt load, is under pressure to show investors and credit-rating agencies that it can still borrow money from the capital markets.

A group of hedge funds and private equity firms may help it do just that, but at a high price.

Bankers at Morgan Stanley have been reaching out to about a dozen hedge funds, private equity firms and other large investors to gauge their interest in providing up to $2 billion in financing to Puerto Rico, according to people briefed on the discussions.

The talks are fluid, but one of these people, who spoke on the condition of anonymity, said the debt could carry yields as high as 10 percent, more than double what a highly rated city or state pays to borrow in the current municipal debt market.

…As a commonwealth of the United States, Puerto Rico cannot file for Chapter 9 federal bankruptcy protection. But some investors fear that the lack of a court-supervised bankruptcy process could lead to a free-for-all among Puerto Rico’s creditors or the need for a bailout from a reluctant federal government.

[source]

PG View: While I’m not sure how Puerto Rico can afford to pay a 10% coupon, I sort of like the idea of a private bailout…as long as their is no explicit or implicit Federal backstop.

Posted in Debt, Economy |

Larry Summers on why the economy is broken — and how to fix it

14-Jan (Washington Post) — In November, former Treasury secretary Larry Summers took the podium at the International Monetary Fund’s annual conference and delivered a speech that shook the economics world. The weak recovery, he hypothesized, isn’t just the hangover from the financial crisis. It’s evidence of a sickness that predated the crisis. Looking back over the last decade, he argued that the economy, even in the seemingly good times, has been incapable of creating enough demand absent bubbles or extraordinary stimulus. And that problem is getting worse by the day.

In this interview, Summers lays out his concerns in more detail — and suggests three paths we might take to restoring economic balance.

Here are a couple key quotes:

“We are now 10 percent below where we thought the economy would be now in 2007, as the economy has performed surprisingly poorly in the past four years. There’s been close to no progress in regaining potential measured relative to the judgments made at the time in 2007. There’s been only very, very limited progress — even adjusting for demography — in restoring the fraction of the adult population that is working (the employment ratio to previous levels).”

“Most observers think quantitative easing has run into diminishing returns.”

“I am not being critical of the Fed here. There orientation to doing what they can to increase demand has in my view been entirely appropriate, and the economy would be in much worse shape without their efforts. But I am convinced it would be still better to raise demand in the economy in ways that do not work through reduced interest rates but operate at any given level of rates.”

“My consistent advice in 2009 and 2010 when I advised President Obama was that there was essentially no risk of overdoing fiscal expansion given the magnitude of the downturn.”

[source]

PG View: So in light of the diminishing efficacy of QE, more deficit spending is the ticket…

Posted in Debt, Economy, Monetary Policy, QE |

Fitch Says Feb. 7 Debt-Limit Date Is ‘Key’ for U.S.’s Rating

13-Jan (Bloomberg) — Congressional resolution of the U.S. debt-limit suspension scheduled to end Feb. 7 is a “key date” for the nation’s AAA credit rating, according to Fitch Ratings.

President Barack Obama signed legislation last year to suspend the debt ceiling and end a 16-day partial government shutdown. Wrangling about lifting the borrowing limit “risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency,” Fitch said Oct. 15 in a statement when it placed the U.S.’s top ranking on rating watch negative.

“Feb. 7 is a key date for us,” James McCormack, managing director and global head of the sovereign and supranational group at Fitch, said yesterday in an interview in New York. “That’s something we simply have to make a judgment about at the time.”

[source]

Posted in Budget/Debt Ceiling Crisis, Debt |

Things That Make You Go Hmmm…: Quoth The Maven, “Evermore”

Grant Williams has quickly become one of my favorite market commentators. His articles are pithy and often quite funny — in a ‘if this wasn’t so well written, I’d probably be crying’ kind of way.

His latest offering is no exception:

Ladies and gentlemen, I give you (drumroll please) total outstanding credit versus GDP in the United States from 1929 to 2012:

Source: St. Louis Fed

This one chart shows exactly WHY we are where we are, folks.

From the moment Richard Nixon toppled the US dollar from its golden foundation and ushered in the era of pure fiat money (oxymoron though that may be) on August 15, 1971, there has been a ubiquitous and dangerous synonym for “growth”: credit.

The world embarked upon a multi-decade credit-fueled binge and claimed the results as growth.

Fanciful.

That chart may just make me cry…

Behold the deleveraging that resulted from the Great Recession in context! Try zooming in on the chart if you can’t see it.

Does that look sustainable to anyone? What might the implications be if it is not?

This is a reality that screams ‘get some gold’ as a means of wealth preservation before the wheels well and truly come off this cart!

[source]

Posted in Debt, Economy |

They’re Planning the First Legal “Bank Robbery” in U.S. History

18-Dec (MoneyMorning) — So-called “bail-ins,” which give banks the right to dip into your savings to pay for their lousy financial decisions, have been on the table for years, ever since Cyprus tested the idea.

But they’re moving beyond the “testing phase” now.

The latest clue came from a seemingly benign banking conference on December 2, when one man revealed some frightening central government intentions.

And anyone taking careful notes understands the consequences.

They’re huge.

You see, the most direct impact will be felt by the biggest account holders. But the indirect impact will hit everyone.

401(k)s… IRAs… Individual brokerage accounts…

… Back in early November I told you your retirement account is fair game, and that you should protect yourself by becoming your own central bank. I also suggested there were several things you could do to protect your assets, like owning and investing in hard assets like gold, silver, energy, and real estate; by holding plenty of cash; and by holding some assets internationally.

The thing is, all of these are helpful strategies that can also help protect you against a future bail-in.

[source]

PG View: I would hazard that most depositors don’t view themselves as “investors” in their bank, and yet there seems to be a push to reclassify them as unsecured creditors. As this situation develops, it would be prudent to get some of one’s savings out of the banking system and into a hard asset, such as gold.

Posted in Central Banks, Debt, investments, Monetary Policy |

US budget deficit -$135.2 bln in Nov, inside expectations of -$162.5 bln, vs -$91.6 bln in Oct and -$172 bln a year ago.

Posted in Debt, Economic Data |

Budget deal aims to avert another shutdown

11-Dec (CNN) — Congressional negotiators reached a bipartisan budget compromise on Tuesday that would prevent another government shutdown, if approved by the House and Senate.

House Budget Committee Chairman Paul Ryan said Tuesday the deal with his Senate counterpart, Patty Murray, would set spending levels, reduce the deficit, and relieve some of the arbitrary, forced spending cuts — known as sequestration.

The pair found common ground just days before a Friday deadline to settle the matter.

…”This deal doesn’t solve all of our problems,” Murray said, noting the compromise both sides made with government spending authority expiring in mid-January.

The proposal will raise 2014 spending for the full fiscal year to $1.012 trillion.

[source]

PG View: The deal still needs to pass the House and the Senate and then of course we still have to deal with the debt ceiling again some time after February 7.

Posted in Debt, Economy, Fiscal Cliff |

Is the Fed increasingly monetizing government debt?

by Axel Merk,
03-Dec (Merk Investments) — Fed Chair Bernanke vehemently denies Fed “monetizes the debt,” but our research shows the Fed may be increasingly doing so. We explain why and what the implications may be for the dollar, gold and currencies.

What is debt monetization? A central bank is said to monetize a government’s debt if it helps to finance its deficit. The buying of Treasuries by the Federal Reserve is a clear indication that the Fed is doing just that, except that Bernanke argues the motivation behind Treasury purchases is to help the economy, not the government.

To what extent does the Fed monetize the debt? The above chart shows that since the onset of the fall of 2008, the Fed has purchased enough Treasuries and Mortgage-Backed Securities (MBS), together, “quantitative easing” or (QE) to finance a substantial part of the government deficit. Indeed, by deciding not to “taper” off its purchases, the Fed is engaging in sufficient QE to purchase all debt issued and then some.

[source]

Posted in Central Banks, Debt, Monetary Policy, QE |

Chart Of The Day: The Fed Now Owns One Third Of The Entire US Bond Market

02-Dec (ZeroHedge) — The most important chart that nobody at the Fed seems to pay any attention to, and certainly none of the economists who urge the Fed to accelerate its monetization of Treasury paper, is shown below: it shows the Fed’s total holdings of the entire bond market expressed in 10 Year equivalents (because as a reminder to the Krugmans and Bullards of the world a 3 Year is not the same as a 30 Year). As we, and the TBAC, have been pounding the table over the past year (here, here and here as a sample), the amount of securities that the Fed can absorb without crushing the liquidity in the “deepest” bond market in the world is rapidly declining, and specifically now that the Fed has refused to taper, it is absorbing over 0.3% of all Ten Year Equivalents, also known as “High Quality Collateral”, from the private sector every week. The total number as per the most recent weekly update is now a whopping 33.18%, up from 32.85% the week before. Or, said otherwise, the Fed now owns a third of the entire US bond market.

At this pace, assuming Janet Yellen keeps delaying the taper again and again over fears of how “tighter” financial conditions would get, even as gross US bond issuance declines in line with the decline in deficit funding needs, the Fed will own just shy of half the entire bond market on December 31, 2014… and all of it some time in 2018.

[source]

PG View: If the chart presented by ZeroHedge doesn’t make you gasp, I don’t know what will. It’s becoming increasingly obvious that the Fed is in reality financing the Federal budget deficit. Which then begs the question, how do you exit a market when you are the market?!

Posted in Central Banks, Debt, Monetary Policy, QE |

U.S. national debt rises to $17,211,829,040,346.01.

Posted in Debt |