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Non-Tech : Banks--- Betting on the recovery -- Ignore unavailable to you. Want to Upgrade?

To: David C. Burns who wrote (689)	3/10/2010 6:11:07 AM
From: Road Walker	Read Replies (1) \| Respond to of 1428

Bloomberg News, sent from my iPhone. Citigroup Selling TruPS After Repaying Bailout: Credit Markets March 10 (Bloomberg) -- Citigroup Inc., seeking capital after repaying bailout funds to the Treasury, is selling trust preferred securities as rising investor demand drives borrowing costs to near the lowest in almost five years. The bank plans to issue as much as $2 billion of the securities, known as TruPS, as soon as today, according to a person familiar with the offering who declined to be identified because terms aren’t set. The 30-year fixed-to-floating rate securities may initially yield about 8.875 percent, another person said. Citigroup, 27 percent owned by the U.S. government, is issuing the debt after borrowers sold $13.9 billion of U.S. corporate bonds yesterday, the busiest day in more than a month. The New York-based bank’s offering shows that liquidity is improving, which will help the economy, said Daniel Fuss, vice chairman at Loomis Sayles & Co. in Boston. “It’s wonderful news for Citigroup and also shows markets are functioning very well,” said Fuss, whose Loomis Sayles Bond Fund is in the 97th percentile among peers this year, according to data compiled by Bloomberg. Citigroup is selling the TruPS following a $7.6 billion loss in the fourth quarter after it repaid $20 billion of the securities issued under the Treasury’s Troubled Asset Relief Program, set up in late 2008 to support financial firms and markets. “It’s a capital structure need,” said David Hendler, the head of U.S. financial services research at CreditSights Inc. in New York. “It’s not as dilutive like common equity issuance and they’ve already done a ton of that.” Novartis, MGM Mirage Yields on corporate bonds are near five-year lows, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. They fell to 4.015 percent on Feb. 26, the lowest since May 31, 2005, and were 4.023 percent as of March 9. Average spreads over Treasuries fell to 1.6 percentage points, matching the lowest this year. Elsewhere in credit markets, Novartis AG, Switzerland’s second-biggest drugmaker, and MGM Mirage, the largest casino owner on the Las Vegas strip, led the busiest day for U.S. corporate bond sales since Feb. 4, Bloomberg data show. Novartis sold $5 billion of 3-, 5- and 10-year senior notes for its acquisition of Alcon Inc., the world’s largest eye-care company. MGM Mirage issued $845 million of 10-year bonds to repay loans. American International Group Inc. bondholders reaped at least $3.2 billion after agreeing to sell its two largest non- U.S. life insurance divisions for $51 billion, Bloomberg data show. Sales in Europe In Europe yesterday, Goldman Sachs Group Inc. led 10 sales totaling 7 billion euros ($9.5 billion), the most this year, Bloomberg data show. New York-based Goldman Sachs, the most profitable securities firm in Wall Street history, priced 1.25 billion euros of seven-year debt in its first benchmark deal in the currency in five months. Asian companies are selling record amounts of dollar- denominated bonds amid the lowest relative borrowing costs in more than two years and demand from international investors. BOC Hong Kong (Holdings) Ltd., the Hong Kong unit of Bank of China Ltd., and Chinese developer Evergrande Real Estate Group Ltd. led Asia-Pacific borrowers selling $38.4 billion of dollar debt this year, the fastest start on record, according to data compiled by Bloomberg. Sales climbed 35 percent from $28.4 billion in the same period last year, when they slumped 22 percent after the seizure in credit markets. Nakheel PJSC bonds, part of Dubai World’s planned $26 billion debt restructuring, climbed the most in two months yesterday after JPMorgan Chase & Co. said creditors may get paid face value. The developer’s $750 million sukuk, or Islamic bond, added 5 cents, the most since Jan. 6, to 56.25 cents on the dollar, prices compiled by Bloomberg show. Low Interest Rates Federal Reserve Bank of Chicago President Charles Evans said low U.S. interest rates are likely to be needed “for some time” as high unemployment lingers and inflation stays below his target. “With the unemployment rate at 9.7 percent and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals,” Evans said in the text of a speech in Arlington, Virginia. Weakness in the job market, including long-term unemployment, means that “this accommodation will likely be appropriate for some time,” he said. In the loan market, Anheuser-Busch InBev NV, the biggest beer maker, will cut at least $90 million from annual interest costs by refinancing $17.2 billion of debt it took when the company was formed in 2008. Maker of Budweiser Lenders to the maker of Budweiser set interest at 117.5 basis points over benchmark rates on three-year term loans, and 97.5 basis points on a five-year revolving credit line, according to two people with direct knowledge of the deal. That compares with a margin of 175 basis points the company is paying on its existing debt. The cost of insuring against default on European and Asian corporate bonds fell today. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings fell 5 basis points to 407 basis points, according to JPMorgan Chase & Co. The Markit iTraxx Japan index dropped 2 basis points to 121 basis points in Tokyo, according to BNP Paribas SA prices. The cost of protecting against U.S. corporate defaults rose yesterday. The Markit CDX North America Investment-Grade Index, linked to credit-default swaps on 125 companies, increased 1.2 basis point to 83.7 basis points, according to CMA DataVision. The Markit iTraxx Europe index of swaps on 125 companies with investment-grade ratings was little changed at 74 basis points. ‘Screaming Bargain’ Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting against default on $10 million of debt for five years. AIG said March 1 it was selling AIA Group Ltd. to Prudential Plc for $35.5 billion. A week later, MetLife Inc. agreed to buy American Life Insurance Co. for $15.5 billion. AIG’s $78 billion of bonds surged to 18-month highs since Feb. 26, according to Bloomberg data. The bailed out New York- based firm’s debt is the best performer this month through yesterday on Bank of America Merrill Lynch indexes. Citigroup is the sole bookrunner on its sale of TruPS, the company said in a prospectus filed with the U.S. Securities and Exchange Commission. The filing didn’t specify the amount of the sale. Citigroup shares rose 26 cents, or 7.3 percent, to $3.82 in New York Stock Exchange composite trading yesterday, the biggest rise since August, Bloomberg data show. “People are looking at Citi more as a stable to hopefully gradually growing entity,” Hendler said. The stock is a “screaming bargain,” CreditSights analysts wrote in a March 8 report. The bank raised more than $80 billion of new capital last year, increasing the number of shares outstanding during the last three years sixfold to almost 30 billion. Its book value per share -- its net worth, divided by total shares outstanding -- tumbled to $5.35 as of Dec. 31 from $24.18 at the end of 2006. Citigroup’s $2.35 billion of 8.3 percent fixed-to-floating bonds due in 2057 rose 1.4 cent to 96.5 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The hybrid debt has more than tripled in price in the last year from 30.5 cents, Trace data show. To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net Caroline Salas in New York at csalas1@bloomberg.net Find out more about Bloomberg for iPhone: m.bloomberg.com

To: David C. Burns who wrote (689)	3/10/2010 10:55:52 AM
From: puborectalis	1 Recommendation Read Replies (1) \| Respond to of 1428

Obama Defies Pessimists as Rising Economy Converges With Stocks By Mike Dorning March 10 (Bloomberg) -- The political consensus may be that President Barack Obama’s handling of the economy has been weak. The judgment of money in all its forms has been overwhelmingly positive, and that may be the more lasting appraisal. One year after U.S stocks hit their post-financial-crisis low on March 9, 2009, the benchmark Standard & Poor’s 500 Index has risen more than 68 percent, and it’s up more than 41 percent since Obama took office. Credit spreads have narrowed. Commodity prices have surged. Housing prices have stabilized. “We’ve had a phenomenal run in asset classes across the board,” said Dan Greenhaus, chief economic strategist for Miller Tabak & Co. in New York. “If he was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the president.” The economy has also strengthened beyond expectations at the time Obama took office. The gross domestic product grew at a 5.9 percent annual pace in the fourth quarter, compared with a median forecast of 2.0 percent in a Bloomberg survey of economists a week before Obama’s Jan. 20, 2009, inauguration. The median forecast for GDP growth this year is 3.0 percent, according to Bloomberg’s February survey of economists, versus 2.1 percent for 2010 in the survey taken 13 months earlier. “You have to give them -- along with the Federal Reserve - - a lot of credit,” said Joseph Carson, director of economic research at AllianceBernstein LP in New York. “A year ago, there was panic, as well as concern. And a lot of the expectations were not only that we were going to have declines in activity but they would stretch all the way to 2010, if not 2011.” Job Losses Ease Since then, monthly job losses have abated, from 779,000 during the month Obama took office to 36,000 last month. Corporate profits have grown; among 491 companies in the S&P 500 that reported fourth-quarter earnings, profits rose 180 percent from a year ago, according to Bloomberg data. Durable goods orders in January were up 9.3 percent from a year earlier. Inflation is tame, and long-term interest rates remain low. Still, the economy has become a political burden for Obama. Voters give his administration little credit for its performance, while the unemployment rate remains high, at 9.7 percent in February. Public opinion of Obama’s handling of the economy has gone from 59 percent approval in February 2009 to 61 percent disapproval this February, according to Gallup polls. Critical of Deficit The budget deficits the administration has run up have stirred criticism from investment managers and economists, as well as voters. The Congressional Budget Office projects Obama’s spending proposals would produce a record $1.5 trillion budget deficit this year and a $1.3 trillion deficit in 2011. The investment returns and economic data don’t impress some Obama critics. “Coming off a level that was ridiculously low isn’t much to boast about,” said Dean Baker, co-director of the Washington-based Center for Economic and Policy Research. “What most people care about is the economy creating jobs. It’s still not.” Mark Zandi, chief economist at Moody’s Economy.com, said the public’s opinion of the economy is likely to improve as the gains companies have made begin to translate into more jobs and higher wages. “Businesses are doing very well but households have yet to benefit,” Zandi said. “Households will eventually benefit, but they’ll have to see it before they believe it.” 300,000 Jobs Seen The U.S. may add as many as 300,000 jobs in March, the most in four years, David Greenlaw, chief fixed-income economist at Morgan Stanley in New York, said in a Bloomberg Radio interview. Zandi said the economic rebound is largely a result of the policies of the White House and Federal Reserve. He cited the bank bailout, the Fed’s low-interest-rate policy and support for credit markets, and the Obama administration’s stimulus plan, bank stress tests and backing of Fannie Mae and Freddie Mac. “When you take it all together, the response was massive and unprecedented and ultimately successful,” Zandi said. Phil Swagel, who was assistant Treasury secretary for economic policy in George W. Bush’s administration, considers himself a critic of Obama, though he said the White House policies were crucial. “They could have done a better job, but their economic policies, including the stimulus, have helped move the economy in the right direction,” said Swagel, now an economics professor at Georgetown University’s McDonough School of Business. Productivity Gains While jobs have been slow to come back even as GDP is growing, the gains in productivity during the past year will strengthen the economy, said Greenhaus of Miller Tabak. Productivity grew at a 6.9 percent annual pace in the fourth quarter, capping the biggest one-year gain since 2002. While small businesses still have difficulty getting loans, credit markets have thawed. Spreads on investment-grade corporate bonds have narrowed from 5.13 percentage points on the day Obama took office to 1.63 percentage points on March 8, according to Barclays Capital. Rates on 30-year fixed mortgages have dropped from an average 5.20 percent on Inauguration Day to 5.03 percent on March 8, according to Bankrate.com. Housing prices, which dropped since 2007 and proved a drag on the economy, have firmed. The median sales price for existing homes in January was the same as a year earlier. International currency markets are bullish on the dollar, which has rallied more than 8 percent since Nov. 25, according to the Intercontinental Exchange’s Dollar Index. And commodity prices are up more than 32 percent since Obama took office, according to the UBS Bloomberg Commodity Index. “There’s definitely legs in this recovery,” said John Silvia, chief economist for Wells Fargo Securities. “There’s progress being made at the national level. But in their own situations, a lot of people are still struggling.”