Category Archives: Bond

Delta Gold Corporation and Commonwealth Silver and Gold Mining Inc. Mutually Agree to Terminate Binding Agreement for Proposed Business Combination

Effective immediately, Delta Gold Corporation (TSX VENTURE:DLT) (“Delta Gold”) and Commonwealth Silver and Gold Mining Inc. (“Commonwealth Silver”), a privately-held company incorporated under the federal laws of Canada, have agreed to mutually release one another and terminate their Arrangement Agreement dated June 6, 2014 and subsequent amendments (the “Agreement”) with respect to a proposed business combination (the “Transaction”) that would have resulted in a reverse takeover of Delta Gold by Commonwealth Silver.

The Transaction was subject to a number of conditions and approvals, which included approval by the respective shareholders of Delta Gold and Commonwealth Silver, Court approval and the parties satisfying the conditions of the TSX Venture Exchange, which included the completion of a concurrent minimum equity financing on acceptable terms.

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Beam bonds soar on M&A news

NEW YORK, Jan 13,2014 (IFR) – Beam’s bonds ratcheted in by as much as 15 basis points on Monday after Japan’s Suntory Holdings made a USD16bn bid for the US spirits maker.

Beam’s 3.25% June 2023s were trading around 60p bid/55bp offered this morning, from around 70/65bp on Friday. Its 1.75% 2018s tightened to Treasuries plus 30bp mid-morning from around Treasuries plus 45bp at open.

 

The tightening is based on hopes that a successful bid from Suntory will trigger a change of control (CoC) covenant aimed at protecting investors against credit event risk.

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Hedge Funds See Repeat of Yen Slide That Paid Soros, Currencies

According to Bloomberg,

Hedge funds are betting on another run of yen weakness, a trade that made money earlier this year for billionaire George Soros, putting them in opposition to economists who see Japan’s currency little changed into 2014.

Futures traders pushed net shorts, or wagers the yen will fall versus the dollar, to the highest since July 2007, according to the Commodity Futures Trading Commission. That contrasts with the median estimate of more than 50 analysts surveyed by Bloomberg, which puts the currency at 102 per dollar at the end of the first quarter of 2014, from 101.47 today.

Japan has resorted to an unprecedented $70 billion of monthly bond purchases since April to depreciate its currency, boost growth and combat deflation. The yen has plunged 15 percent this year, on pace for the biggest drop since 1979.

“Everybody likes dollar-yen higher,” Brad Bechtel, the managing director at Faros Trading LLC in Stamford, Connecticut, said in a Nov. 22 interview. “And everyone has it on.”

The yen fell to as low as 101.92 per dollar yesterday, the weakest level since May, when it slid to a 4 1/2-year low of 103.74. While it gained for the first time in four days today, its decline this year makes it the worst performer after South Africa’s rand among 16 major currencies tracked by Bloomberg.

Soros Profits

Japanese Yen and U.S. Dollar (Bloomberg)

Japanese Yen and U.S. Dollar (Bloomberg)

Soros, 83, made almost $1 billion from November 2012 to February 2013 on bets the yen would tumble, according to a person close to the billionaire’s family office. Michael Vachon, a spokesman for Soros Fund Management LLC, declined to comment.

Soros’s former chief strategist, Stan Druckenmiller, who made $10 billion with Soros in 1992 from a wager that the Bank of England would be forced to devalue the pound, has also been selling the yen. Druckenmiller, the founder of Duquesne Capital Management LLC, said in a Bloomberg interview in September that his firm is “short some yen,” while being “long some Japanese” stocks.

Fortress Macro Fund, which is run by Michael Novogratz and Adam Levinson, made money trading the yen last year when the currency fell 13 percent. Fortress Macro Funds oversee $3.8 billion. Spokesman Gordon Runte couldn’t be reached for comment.

Signs that the Federal Reserve may reduce its $85 billion a month of bond purchases, which pump money into the economy and debase the dollar, are also driving the yen’s plunge versus the U.S. currency. Minutes of the U.S. central bank’s Oct. 29-30 policy meeting showed that Fed officials expected to reduce their stimulus program “in coming months” as the economy improves.

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U.S. Stocks Fall as Best Buy Drops Before Bernanke Speech

According to Bloomberg,

U.S. stocks fell after disappointing forecasts from Best Buy (BBY) Co. and Campbell Soup Co. while investors awaited a speech from Federal Reserve Chairman Ben S. Bernanke to gauge the prospect of continued stimulus.

Best Buy slid 11 percent, the most in almost a year, after saying it will work to keep pace with competitors’ discounts in the holiday season, hurting fourth-quarter profitability. Campbell Soup fell 6.2 percent after cutting its profit forecast. Home Depot Inc. (HD) gained 0.9 percent after boosting its earnings forecast as rising home prices spurred homeowners to splurge on renovations. Tyson Foods Inc. climbed 4.6 percent for a sixth day of gains as sales beat analysts’ expectations.

The Standard & Poor’s 500 Index fell 0.2 percent to 1,787.87 at 4 p.m. in New York. Yesterday, the gauge briefly surpassed 1,800 (SPX) for the first time. The Dow Jones Industrial Average lost 8.99 points, or less than 0.1 percent, to 15,967.03. About 5.8 billion shares changed hands on U.S. exchanges, about 3 percent below the three-month average.

“The economy is not doing badly, and the Fed is remaining very aggressive and very friendly toward the market,” Bruce Bittles, chief investment strategist at RW Baird & Co., said by phone from Sarasota, Florida. His firm oversees $100 billion. “We’ve had a big run. My suspicion is that the market might go sideways now for a little while before we encounter a year-end rally in December.”

The S&P 500 is up 25 percent this year, putting it on track for the biggest annual gain since 2003, as the Fed kept its monetary stimulus to spur economic growth and corporate earnings topped analysts’ estimates.

‘More Hopeful’

BlackRock's Fink on Equities, Regulatory Oversight

BlackRock’s Fink on Equities, Regulatory Oversight

Bernanke is scheduled to speak in Washington today after Fed Bank of New York President William Dudley said yesterday that while he’s “more hopeful” the U.S. economy is strengthening, it’s not enough to warrant stimulus cuts yet.

Chicago Fed President Charles Evans, among the most vocal advocates for additional easing from the Fed, said today that while the central bank is going to deliver highly accommodative policy until it can get the economy where it wants, the biggest challenge is credibility.

The Organization for Economic Cooperation and Development cut global growth forecasts for this year and next as emerging-market economies including India and Brazil cool. The world economy may expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and 4 percent predicted in May, the Paris-based OECD said in a report today. Growth in the U.S. will be 1.7 percent and 2.9 percent this year and next, broadly similar to the outlook in May.

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Bernanke Sees Low Interest Rates Long After Bond Buying Ends

According to Bloomberg,

Fed Chairman Ben S. Bernanke

Fed Chairman Ben S. Bernanke

Federal Reserve Chairman Ben S. Bernanke said the labor market has shown “meaningful improvement” since the start of the central bank’s bond-buying program and that the benchmark interest rate will probably stay low long after the purchases end.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate falls below the Fed’s 6.5 percent threshold, Bernanke said today in a speech to economists in Washington. He said a “preponderance of data” would be needed to begin removing accommodation.

Fed officials will weigh both the “cumulative progress” since they began the third round of bond buying in September 2012 as well as “the prospect for continued gains” as they evaluate the outlook for the labor market, Bernanke said. While recent job reports have been “somewhat disappointing,” the unemployment rate has fallen 0.8 percentage point during the program and about 2.6 million payroll jobs have been added, he said.

Policy makers are debating how to slow the pace of asset purchases without causing a surge in interest rates that could jeopardize the more than four-year economic expansion. Central bankers have sought to convince investors that tapering the $85 billion monthly pace of bond purchases wouldn’t signal that an increase in the benchmark interest rate is any closer.

‘Progressed Sufficiently’

When the Fed does slow asset purchases, “it will likely be because the economy has progressed sufficiently” for central bankers to rely more on guidance about the outlook for the main interest rate, Bernanke said.

“He’s saying that they achieved improvement in labor market conditions, but they’re still uncertain whether that progress will be sustained without all their support,” said Laura Rosner, a U.S. economist at BNP Paribas SA in New York and a former researcher at the Federal Reserve Bank of New York.

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Forget data and rhetoric, Fed liquidity’s the only show in town

(Reuters) – For all the fevered speculation about when the Federal Reserve will begin scaling back its monetary stimulus, market volatility has been taking a leisurely nap, suggesting investors see no major shocks on the horizon to derail their bets.

Low market volatility is a sign markets expect no “taper” any time soon, or that they are steeled for a reduction in the pace of the Fed’s bond-buying if it comes.

The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

The sting of the taper has been gradually sucked out of markets since the Fed’s surprise decision not to start withdrawing stimulus in September.

Since then, implied volatility in U.S. Treasuries, stocks and key dollar exchange rates has sunk close to its lowest in months, or in some cases years.

This might come as a surprise, given the noise surrounding the latest relatively upbeat U.S. employment and economic growth figures and the keenly awaited congressional testimony from Fed Chair-elect Janet Yellen last Thursday.

But the Fed’s $85 billion-a-month asset purchase program trumps everything, and as long as the liquidity taps are open, the economic data will only have a real impact on markets if it changes the Fed’s thinking.

“We’re not trying to follow the twists and turns of the very short-term investment cycle,” said Kevin Gardiner, head of global investment strategy at Barclays Wealth in London.

The same goes for data or Fed commentary, he said. Only if they “dramatically changed” the Fed’s policy outlook would he consider altering his strategy.

Market pricing and indicators suggest he’s not alone. Wall Street last week posted record highs on an almost daily basis, and the S&P 500 .SPX and Dow Jones Industrials .DJI have risen for six consecutive weeks.

This has been fuelled by a collapse in volatility from the unusually high levels around the U.S. debt ceiling and government shutdown crisis in early October. The VIX index .VIX of implied volatility for the S&P 500 fell to a three-month low on Thursday.

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Euro Zone: Fizzling Growth Seen to Back Draghi Cut Case

According to Bloomberg,

Bank of Spain (Bloomberg)

Bank of Spain (Bloomberg)

Euro-area growth data this week may show the region’s nascent recovery slowing to a crawl, supporting Mario Draghi’s case for an interest-rate cut to help the economy get back to its feet.

Gross domestic product in the region rose just 0.1 percent in the third quarter, according to the median forecast of 41 economists in a Bloomberg News survey. In the 3 1/2 hours before that report on Nov. 14, economists predict a series of data releases to show growth slowing in Germany and stalling in France, with Italy remaining mired in an unprecedented slump.

Such an outcome would confirm that the recovery is grinding after a second-quarter growth spurt of 0.3 percent that ended the region’s record-long recession. The data are due one week after the European Central Bank president’s surprise rate cut to 0.25 percent. Draghi said at the time that the euro zone faces the danger of a “prolonged” period of low inflation.

“There are a few minor bright spots, for example Spain, (SPNAGDPQ) but Italy will continue to remain in contraction and growth in France will likely be flat at best,” said Nick Matthews, a London-based economist at Nomura International Plc. “That plays into the scenario the ECB is seeing, which is a very weak and fragile recovery.”

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