2024-03-04 16:15

ZURICH, March 4 (Reuters) - The Swiss National Bank (SNBN.S) , opens new tab should pick an outsider to replace its departing chief Thomas Jordan, a report by a group which campaigns for accountability at the central bank said. SNB Vice Chairman Martin Schlegel has been floated by Swiss media and experts as favourite to replace Jordan, who announced on Friday he would be stepping down after 12 years in charge. But Jordan's exit gives an opportunity to broaden the SNB's three-person governing council and improve its transparency, the SNB Observatory said in a report released on Monday in response to last week's announcement. "Thomas Jordan did a very good job keeping inflation in check, but after 12 years leading the SNB he leaves a long shadow," said Stefan Gerlach, a former deputy governor of the Central Bank of Ireland, and one of the authors of the report. "It's time for the SNB to go for an experienced outsider," added Gerlach, who is currently chief economist of Switzerland's EFG Bank. With two years on the SNB's rate setting governing board Schlegel had too little experience in this area, Gerlach said, adding that he was potentially too close to Jordan. Schlegel spent part of his early career at the SNB as Jordan's intern within the central bank's research department. Antoine Martin, who joined the SNB in January from the Federal Reserve Bank of New York, has not been at the bank long enough to become chairman, Gerlach said. Historically two of three board members have been from outside, Gerlach said, bringing broader perspectives. Former Chairman Philipp Hildebrand was from the financial sector and former vice chairman Fritz Zurbruegg was from Swiss finance department before joining the SNB. The report's co-authors included Yvan Lengwiler of the University of Basel and president of the Swiss government's group of experts on banking stability, and Charles Wyplosz from the Graduate Institute in Geneva. Jordan's successor will be chosen by the Swiss government after a recommendation from the Bank Council, which is the SNB's supervisory body The Observatory's report said now was a time to address other issues at the SNB such as increased transparency. Rules on the SNB's profit distribution also needed to be overhauled, the Observatory said, while the Bank Council needed to be much more forceful. More women also needed to be promoted at the SNB, said the Observatory, which said only 17% of the central bank's senior management were female, citing SNB figures. https://www.reuters.com/business/finance/swiss-report-calls-central-bank-hire-outsider-next-chairman-2024-03-04/

2024-03-04 15:54

March 4 (Reuters) - Short sellers targeting a key regional U.S. bank exchange-traded fund have made $977 million on paper so far in 2024, data from analytics firm Ortex showed, as troubles at New York Community Bancorp (NYCB.N) , opens new tab rippled across the industry. The fallout from NYCB's exposure to the troubled commercial real estate (CRE) market has made many investors jittery about the health of the sector. "I think it (CRE exposure) is going to affect a lot more banks, whether or not they have underwritten properly," said Robert Riva, member of real estate department at corporate law firm Cole Schotz. "This is not something that's localized to someone who's maybe repeating the mistakes of Lehman Brothers, just 15 years later. It's an industry-wide problem." The SPDR S&P Regional Banking ETF (KRE.P) , opens new tab has dropped 9.2% this year, benefiting short sellers, who sell borrowed securities and aim to buy them back at lower prices. ETFs track stocks, commodities, bonds or a basket of assets like an index fund. Those betting against the Invesco KBW Regional Banking ETF (KBWR.O) , opens new tab, another ETF tied to the industry, are sitting on $663 million of paper profits. Bank of Hawaii Corp (BOH.N) , opens new tab, Axos Financial (AX.N) , opens new tab and Columbia Financial (CLBK.O) , opens new tab were the top targets for short sellers across the two ETFs, Ortex data showed. Short interest for the three, as a percentage of their free float, stood at 15.98%, 11.73% and 9.38%, respectively, as of March 1. The trio have a sizeable footprint in the CRE market, including multi-family properties - apartment buildings with more than four units. As of last year, such loans accounted for 27%, 32% and 48% of their loan books, respectively. The lenders did not immediately respond to requests for comment. "Multi-family is of big issue for almost every bank in the country. That is where most of the game will be played in the banking sector," said Brian Graham, co-founder of financial services-focused advisory and investment firm Klaros Group. Such loans also made up for 44% of the lending portfolio at NYCB as of Dec. 31. The bank's shares have plunged 65% this year, fetching $145 million in paper profits for short sellers, according to Ortex. https://www.reuters.com/markets/us/short-sellers-rake-nearly-1-bln-targeting-us-regional-bank-etf-2024-03-04/

2024-03-04 15:27

ORLANDO, Florida, March 4 (Reuters) - What looked from a distance like an unscalable debt 'maturity wall' for 'junk'-rated U.S. companies next year might be easier to jump after all. With borrowing costs elevated by the Fed's most aggressive interest rate-hiking cycle in 40 years and expected to stay high, there are fears that firms with the lowest credit ratings will struggle to refinance, potentially spreading a wave of defaults and financial distress over the wider economy. Some of the numbers are certainly eye-catching. Nearly $1.5 trillion of high-yield debt, including loans, is maturing globally through the end of 2026, of which $882 billion is U.S. debt, according to S&P Global. Of that, $338 billion is in bonds: $53.8 billion maturing this year, $125.5 billion next year, and $158.6 billion in 2026. These are large amounts of debt for companies having to refinance at potentially double the original rate. But early indications show they are managing to do just that. And there are reasons to believe they can successfully navigate the path ahead too: the economy is showing no sign of rolling over, attractive yields are bringing lenders back, while cooling inflation keeps rate cuts on the table. It's a favorable set of conditions for junk-rated firms, which tend to begin rolling over their debt earlier than cash-rich investment-grade firms, around 12 months before maturity. S&P Global research shows non-financial firms globally last year reduced 2024 maturities by 44%, lowered 2025 maturities by 27%, and even started trimming 2026 maturities by 6%. Looking solely at corporate bonds, excluding loans, the 2024 'maturity wall' was reduced by 13% last year and the 2025 wall was lowered by 6%. This has continued in the first two months of this year. "In our view, the maturity wall is not a significant risk over the next 12 months," said Amanda Lynam, head of macro credit research at BlackRock. I CAN CCC FOR MILES Lynam also notes two other encouraging signals for the high-yield market: Default rates may be plateauing and there is an increased willingness to lend to the lowest quality borrowers. Default rates on junk-rated corporate bonds, those with a BB- credit rating or lower, look to have leveled off in recent months around 4%. That in itself is a pretty low level historically, certainly relative to previous episodes of wider economic or financial stress when they reached 8% at a minimum. Default rates may well rise further but not that far, barring an unforeseen shock. Analysts at S&P Global expect the U.S. trailing-12-month 'junk' corporate default rate to reach 4.75% by the end of this year. After a near-uninterrupted, two-year hiatus since the Federal Reserve began its policy tightening cycle in March 2022, CCC-rated U.S. borrowers are issuing debt again. They feel confident coming back to the market, but lenders are also prepared to lend to them again. The resilience of the junk bond market - yield spreads over Treasuries are the narrowest in two years - indicates that the economy's glide path to a 'soft landing' or even 'no landing' has perhaps been hiding in plan sight all along. While the deeply inverted yield curve, soured consumer confidence and other time-honored recession markers have long flagged a pending downturn, the high-yield bond market has been flashing completely opposite signals. 'Junk' bonds are often among the first assets investors dump when rising interest rates start to bare their teeth, credit conditions become too tight, and the good times on Wall Street and Main Street come to a halt. Sometimes a crashing halt. But if 'higher for longer' borrowing costs are a headwind for junk, 'stronger for longer' economic growth is an even more powerful tailwind. "We view a stronger economy as more favorable for credit quality as it should help support issuers' revenue and growth, which can help offset higher borrowing costs," said Evan Gunter, director, Credit Research & Insights, at S&P Global Ratings. TOUGHER TEST IN 2028 Junk-rated companies don't have the cash buffers to see them through the bad times that investment-grade companies do, so they are more reliant on good old-fashioned growth to ensure they can meet their borrowing needs. To be sure, these needs will become more pressing in a few years' time when post-pandemic borrowing starts to mature. According to S&P Global, the global high-yield maturity wall in 2028 will be $1 trillion, higher than the investment-grade wall. That may scare the horses. But there's a long way to go before then. As Michael C. Eisenband, global co-leader of corporate finance & restructuring at FTI Consulting, points out, every bout of 'maturity wall' panic in markets or the media in the past 15 years has passed off without incident. Super-loose Fed policy and trillions of dollars of quantitative easing might have helped, of course, but he has a point. "Much like other feared apparitions such as the Loch Ness monster and Sasquatch, the maturity wall is visible at great distance but never up close," he wrote last month. (The opinions expressed here are those of the author, a columnist for Reuters) https://www.reuters.com/markets/us/us-junk-bond-maturity-wall-not-high-feared-2024-03-04/

2024-03-04 15:23

LONDON, March 4 (Reuters) - Stronger-than-expected Turkish inflation data led JPMorgan on Monday to add another 500 basis point interest rate hike to their forecasts for the country in April, a move that, if correct, would hoist Turkey's headline rates to 50%. The U.S. investment bank previously expected Turkey's recent hike, to 45%, to be the last of the current cycle, which has seen the bank jack up rates by a huge 3,650 basis points since June. "Headline CPI inflation came in at 4.5% m/m in February, much higher than our expectation of 4.2% and the market consensus of 3.8%," JPMorgan said in a research note. The bank kept its year-end policy rate forecast of 45%, however, saying the Turkish central bank might cut its policy rate in November and December. https://www.reuters.com/world/middle-east/jpmorgan-adds-new-turkey-rate-hike-forecast-after-inflation-jump-2024-03-04/

2024-03-04 14:43

March 4 (Reuters) - Shares of Super Micro Computer (SMCI.O) , opens new tab jumped 14% on Monday after the artificial-intelligence server maker was set to join the S&P 500 index (.SPX) , opens new tab, highlighting the growing dominance of AI stocks in Wall Street's benchmark index. The San Jose, California-based firm is among the biggest beneficiaries of the AI frenzy on Wall Street. Its shares have climbed 1,000% since the end of 2022, including a more than three-fold jump in 2024, taking its market value to $50.6 billion. As part of the quarterly rebalance of the most widely followed stocks index, Super Micro and Deckers Outdoor Corp (DECK.N) , opens new tab will join the S&P 500 on Monday, March 18, replacing Whirlpool Corp (WHR.N) , opens new tab and Zion Bancorp (ZION.O) , opens new tab. Deckers Outdoor shares gained 5.4% and Zion Bancorp slipped 2.2%. Super Micro and Deckers Outdoor will benefit from readjustments at popular index funds that track the S&P 500 and have assets of about $7.8 trillion, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. About $30.1 billion in rebalance trading will take place before March 18, Silverblatt estimated. Money managers are on the hunt for other companies that are capitalizing on the AI boom after bellwether Nvidia's (NVDA.O) , opens new tab stunning stock rally recently made it the third most valuable U.S. company. In late January, Super Micro delivered blowout quarterly results and raised its full-year revenue forecast significantly ahead of Wall Street estimates. The stock was last trading at $1,034.76, inching towards its all-time high of $1,077.87 hit on Feb. 16. https://www.reuters.com/technology/super-micro-shares-jump-ai-bet-gears-up-sp-500-entry-2024-03-04/

2024-03-04 13:42

LONDON, March 4 (Reuters) - Hedge funds piled into long positions on U.S. real estate investment stocks in the week ending Friday, the sixth straight week that these speculators bet on a rebound in commercial and industrial properties, a Goldman Sachs note said. Commercial real estate (CRE) exposure is back in the spotlight after New York Community Bancorp (NYCB.N) , opens new tab recently reported it had set aside huge provisions against its CRE loans. NYCB shares have plunged over 65% so far this year. While small and mid-sized banks heavily exposed to office and retail properties have been hurt by a post-pandemic shift in work and shopping habits, a sharp fall in their valuations have also created opportunities for the likes of hedge funds. Real estate was the most net bought stock sector tracked by Goldman Sachs prime brokerage which serves hedge funds, Goldman said in a note published on Friday and seen by Reuters on Monday. "These banks are facing a real crunch, needing to sell off assets potentially below recent appraised values to manage their balance sheets. This situation presents a unique opportunity for REITs to buy into the market at lower prices," said Bruno Schneller, a managing director at INVICO Asset Management, referring to investors picking up offloaded loans from banks with CRE exposure. Hedge funds have noted that this may in turn increase the value in REITs. Much of the hedge fund buying was in real estate investment trusts with diversified portfolios as well as those which focus on office space and specialised real estate holdings, said Goldman Sachs. Hedge funds were still short REITs that focused on retail, health care and hotel and resort spaces, the bank added. Long positions compared to bets against the sector are relatively near their highest in the past year, it said. The resilient U.S. jobs market and broader optimistic economic prospects make real estate a sector that would benefit from a robust economy, said Schneller. "The move to go long on real estate is not merely a bet on economic endurance but a calculated engagement with a sector showing signs of a U-shaped recovery," he said. https://www.reuters.com/markets/us/hedge-flow-hedge-funds-bet-us-real-estate-rebound-2024-03-04/