Argentina Can’t Pay Debt Until Economy Grows, Fernandez Says

© Reuters.  Argentina Can’t Pay Debt Until Economy Grows, Fernandez Says © Reuters. Argentina Can’t Pay Debt Until Economy Grows, Fernandez Says

(Bloomberg) — Argentina is willing but unable to pay its debts under current conditions and needs the economy to grow again before meeting its obligations, President Alberto Fernandez said in his first speech after being sworn in.

The government will seek “constructive and cooperative” dialogue with the International Monetary Fund and bondholders to address the debt load, Fernandez said, without giving additional details. The outgoing administration of Mauricio Macri left Argentina in “virtual default,” he said.

Fernandez, 60, read off a list of challenging economic indicators that he’s inheriting including the biggest debt load as a percentage of gross domestic product since 2004, when the country was in default and he was cabinet chief. Investors are awaiting details from incoming Economy Minister Martin Guzman on his plans to confront the debt crisis which may include proposals to extend maturities.

“The country is indebted, cloaked by an instability that discards the possibility of development and leaves it hostage to foreign financial markets,” he said. “Argentina should grow with a project of its own and implemented by Argentines, not dictated by foreigners with old recipes that always fail.”

Fernandez’s speech was “constructive,” said said Shamaila Khan, the New York-based director of emerging-market debt at AllianceBernstein. “They obviously didn’t have much policy details. But I don’t think we were expecting that from an inauguration speech.”

Debt Challenge

Macri, who reinserted Argentina into global bond markets after taking office in 2015 but later failed to control inflation and kick start growth, signed a record $ 56 billion IMF credit line last year. The implied probability of non-payment over five years with credit-default trading stands at about 95%.

Macri, who was forced to reimpose capital controls in September after markets sank due to a primary election that showed Fernandez set to win the presidency, had also announced plans to “reprofile” a total of $ 101 billion in debt between payments due to private creditors and the IMF.

Moody’s Investors Service Inc. said restructuring Argentina’s medium- and long-term debt will be a challenge for Fernandez’s administration, and that the future of the nation’s credit ratings will depend on “losses imposed on bondholders as well as the long-term sustainability of the government’s yet-to-be-defined economic program.”

Fernandez said that the 2020 budget can only be drawn up once the debt negotiation has been completed, as well as some economic and social measures haven been implemented to compensate the impact of the crisis in the economy.

“Solving the problem of the unsustainable debt that Argentina has today is not a matter of winning a dispute. The country has the will to pay, but it lacks ability to do it,” Fernandez said.

Argentina’s bonds fell slightly on Tuesday with notes due in 2028 down 0.5 cent to 40 cents on the dollar.

(Updates with quotes from Fernandez, analysts)

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DOJ watchdog says no “political bias” in FBI probe of Trump campaign, but errors

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A $3 Trillion BOJ Quantitative Tightening Scheme? Kuroda Says No

(Bloomberg) — Bank of Japan Governor Haruhiko Kuroda had a little blast from the past in question time at the nation’s parliament on Friday, with a query about an old rule for monetary policy that fell by the wayside years ago.

It was called the banknote rule, and it said BOJ holdings of Japanese government bonds shouldn’t exceed the value of banknotes outstanding. The idea was it would help to avoid any impression the central bank was directly financing the government. When Kuroda unleashed his first stimulus program in April 2013, he and the board decided to “temporarily suspend” the principle.

Fast forward six and a half years, and “temporary” is looking much like permanent. For the record, Kuroda, responding to a lawmaker at the Diet Friday, said there was no need to reinstate the rule now.

Any immediate reinstatement would be practically impossible. That’s because the BOJ would need to shrink its bond portfolio by some $ 3.4 trillion to meet it. Its bond holdings total 475 trillion yen ($ 4.3 trillion) at latest count, versus only 108 trillion of banknotes outstanding.

It speaks to the massive expansion of the BOJ’s balance sheet under Kuroda. The governor said back in 2015 that the banknote rule would need to be considered once 2% inflation was reached, but hasn’t much discussed it recently. (Most private economists in Japan don’t ever see the country reaching the BOJ’s 2% inflation target.)

Theoretically, the bank could work off its holdings over time by letting the securities mature, though given the size of the portfolio that would take many years. Another option floated by BOJ watchers is to move a large portion of the assets off the central bank’s balance sheet. The Hong Kong Monetary Authority effectively did that after buying equities during the Asian financial crisis. The HKMA then floated its holdings as a tracker fund.

The BOJ could then look at returning to the old banknote rule. But there’s little likelihood of the debate becoming pressing: Japan’s inflation rate was 0.4% in October, less than a quarter the way to the target.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Japan finance minister Aso says the government wants to secure the economy’s recovery trend

The finance minister’s comments are in relation to the poor industrial production data release earlier:

Aso speaking on the upcoming extra budget. 

He is refusing to answer questions on why he was kicked out of the band ‘Men Without Hats’ although I think I might know.

The finance minister's comments are in relation to the poor industrial production data release earlier:

Data also out from Japan today:

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Top Chinese diplomat says US has become world’s biggest destabilizing factor

Chinese state councillor Wang Yi rails against US at G20 meeting

The US is destabilizing the world and smearing China, the top Chinese diplomat said Saturday in surprisingly strong language.

“The United States is broadly engaged in unilateralism and protectionism, and is damaging multilateralism and the multilateral trading system. It has already become the world’s biggest destabilising factor,” China’s Foreign Ministry cited Wang as saying at the G20 foreign minister’s meeting in Japan.

He accused the US of suppressing legitimate Chinese businesses with groundless claims as well.

“Certain US politicians have smeared China everywhere in the world, but have not produced any evidence,” he said.

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Weidmann Says He Backs Lagarde Plan for ECB Strategy Review

(Bloomberg) — Bundesbank President Jens Weidmann said he supports a review of the European Central Bank’s policy strategy, and repeated his oft-made warning that persistent monetary stimulus has side effects that mustn’t be ignored.

In a speech in Frankfurt, hours after ECB President Christine Lagarde said she’ll announce a review “in the near future,” Weidmann said it’s worth investigating new policy approaches that would allow officials to respond quickly in an economic downturn, while taking into account the potential costs and benefits.

“I fully agree with Christine Lagarde — the monetary-policy strategy should always evolve in a way that best serves our mandate,” Weidmann said. “Since our strategy has been in place since 2003, it may be worth collecting lessons from the financial crisis and the more recent past at the appropriate time.”

Weidmann, who sits on the ECB’s Governing Council, also discussed the advantages and limits of the central bank communicating its policy intentions — commonly referred to as forward guidance — and argued that the institution’s mandate doesn’t allow for the symmetric approach to inflation targeting advocated by some officials.

He warned against committing to hold interest rates lower for longer than implied by its goal, allowing consumer-price growth to overshoot, as policy makers will have to renege on their promise eventually once it accelerates. He said such an approach wouldn’t be in line with the ECB’s goal of keeping inflation “below, but close to, 2%” and may pose communication challenges and credibility risks.

“Furthermore, after a long period of low interest rates, holding interest rates lower for even longer would aggravate the risks and side effects of a very expansionary monetary policy,” he said.

The risks arising from financial imbalances is a topic of increasing concern — something the ECB alluded to in its Financial Stability Review this week.

German Optimism

The Bundesbank head pointed to the burden negative rates place on banks that primarily generate their income from deposit-taking and lending. The impact of the ECB’s new tiering policy that exempts some deposits from the charge “is likely to be perceptible, but modest,” yet the indirect effects for institutions engaged in maturity transformation and the flat yield curve matter more.

Turning to the German economy, Weidmann noted that the country avoided slipping into a technical recession this year, and pointed to “first tentative signs” that the downturn in its export-oriented industry could level off. Data earlier in the day showed that private and public spending, along with exports, steered Europe’s largest economy to a slight expansion last quarter.

Still, euro-area figures showed worrying signs that the region’s manufacturing slump, in which Germany has been worst-hit, might be spreading to the services sector. Weidmann was less pessimistic, but echoed Lagarde and other colleagues at the ECB in saying politicians should do more to promote growth.

“Near the effective lower bound of interest rates, fiscal policy is less at risk of crowding out private demand,” he said. “This makes it a potentially powerful instrument if economic developments were to take a marked turn for the worse — which, just to be clear, is not what is generally expected.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Delta CEO says he would consider using Boeing 737 Max

Delta Air Lines CEO Ed Bastian said he would consider flying the revamped Boeing 737 Max. The 737 Max is currently grounded following two crashes in October 2018 and March 2019.  

“Obviously it needs to continue to go through the certification process,” Bastian told “CBS This Morning.” “The FAA makes that decision. And once the regulators get comfortable with it… total faith.”

Delta didn’t have any of the beleaguered 737 Max planes in their fleet before they were grounded and Bastian said they’re not planning to order any. But Bastian said safety concerns weren’t the issue.

“Safety wasn’t part of that consideration,” Bastian said. “I tell people sometimes you’d rather be lucky than smart in life. And that was probably more fortune, but the reality is it was not a technology we wanted to advance.”

Bastian said Boeing is doing enough to ensure flyers’ safety.

“Boeing is an amazing company,” Bastian said. “We’re the second-largest operator of Boeing equipment in the world. We fly over 600 Boeing aircraft. There’s no question that this is going to bring up opportunities to improve safety and learn more as we go forth. But transportation in the U.S., particularly air travel, is the safest of any transportation system in the world.”

Bastian also defended Delta investing $ 12 billion in airport renovations, rather than lowering ticket prices.

“One of the things that we know when we hear from our customers all the time is the real stress of travel is the ground experience,” Bastian said. “And right here in New York, LaGuardia is probably ground zero for an airport that really needs to be rebuilt. And we’re doing that. So of that $ 12 billion, almost $ 4 billion we’re spending and building the new LaGuardia Airport. We’ve got new airports going up in L.A., Seattle, Salt Lake City, we’re modernizing Atlanta, we’re modernizing Minneapolis. And the flight experience has substantially improved over time.”

About 5 million customers will fly Delta during Thanksgiving week, according to Bastian. He said that’s the most in Delta history. The CEO encouraged travelers to sign up for TSA CLEAR and to use the Fly Delta app to ensure smooth skies.

“We’ve added technology such that even if you get stuck in an airport, if you’re on the app, there’s a live chat feature,” Bastian said. “That’s the best way to get in touch, real-time, is using the Fly Delta app.”

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Goldman Sachs Says British Pound Is Among Favorite 2020 Picks

(Bloomberg) — Goldman Sachs Group Inc (NYSE:). is the latest Wall Street bank to bet on a rally in 2020 as it sees next month’s U.K. elections as a pathway to resolving Brexit.

Sterling will likely appreciate against the euro while U.K. government bonds slide as progress on Brexit after the Dec. 12 vote could remove investment uncertainty and also unleash more public spending, strategists at Goldman said in its ‘Best Trade Ideas Across Assets’ note. That view echoes peers such as Bank of America Merrill Lynch (NYSE:) and Morgan Stanley (NYSE:).

“Our economists think a victory for the Conservative Party in next month’s election would likely result in a fairly swift resolution of the Brexit process, as well as more expansionary fiscal policy,” strategists, including Zach Pandl and George Cole, wrote in a note dated Nov. 21. Clarity on Brexit makes sterling “our preferred G-10 FX long” for the first quarter of 2020, they said.

Goldman predicts the pound will rally more than 4% from current levels and targets 82 pence per euro, seeing all of this move happening in the first three months of 2020. Since there will still be doubt on the next stages of Brexit, given the risk of protracted talks on the future trade relationship between the U.K. and European Union, it recommends making the bet in the options market.

The pound traded around 85.90 pence to the euro on Friday, having gained more than 3% against the common currency this quarter to be the best-performing major currency. Against the dollar, it has climbed nearly 5% since the end of September to trade around $ 1.29.

The New York-based bank is also expecting U.K. sovereign bonds, which have acted as a haven from Brexit risk, to weaken. That will take 10-year gilt yields “sharply higher” with its target at 1%, a level not seen since May 2019 and about 30 basis points above current levels.

“We think the U.K. offers the most attractive shorts in G-10,” the Goldman strategists wrote.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Vice Chair of PIMCO says he is confident both the US and China want trade agreement

John Studzinski is Managing Director and Vice Chairman of PIMCO.

Bloomberg reporting some remarks:

  • Says he does not see a US recession in the next 12 months
  • The US consumer in ‘spend, spend, spend’ mode
  • Confident that the US and China want trade resolution 
  • Says Hong Kong is more a consumer than markets problem 
  • very excited about the Chinese bond market 

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