|Bid||0.0000 x 0|
|Ask||0.0000 x 0|
|Day's Range||2.3000 - 2.3000|
|52 Week Range||1.6000 - 2.5600|
|Beta (5Y Monthly)||0.84|
|PE Ratio (TTM)||82.14|
|Forward Dividend & Yield||0.09 (4.03%)|
|Ex-Dividend Date||Aug 06, 2019|
|1y Target Est||N/A|
Barclays investment bankers are bracing for a double-digit fall in their 2019 bonus pool, as chief executive Jes Staley squeezes pay to ensure the UK lender hits its profitability targets amid criticism by an activist investor. While Barclays has been the best-performing investment bank in Europe recently, its highly paid dealmakers and traders are under pressure from Edward Bramson, who has called for swaths of the previously struggling unit to be closed. It was part of a push by Mr Staley to stay on track to generate a 9 per cent annual return on tangible equity for the overall group.
(Bloomberg Opinion) -- “Worrisome.” “Dangerous and aggressive.” “Abuse of documentation.” “Peak greed.”These are just a few of the ways investors and analysts have described the riskiest corners of the debt markets in the past few days. From the U.S. to Europe, whether in collateralized loan obligations or junk bonds, the feeling that the reach for yield in fixed income is fast approaching a breaking point is becoming too powerful to ignore. It’s perhaps best encapsulated by a quote in the Wall Street Journal from Luca Cazzulani, a senior fixed-income strategist at UniCredit: “Investors are not really interested in safety, they are quite keen on yield.’’That’s good, I guess. Because for those who still favor strong credit protection, it’s getting harder and harder to find it. Let’s start with CLOs. Bloomberg News’s Adam Tempkin had an in-depth article this week with the headline “CLOs Are Packed With New Loopholes, Triggering Investor Backlash.” He reported that investors, analysts and credit raters are taken aback by managers’ efforts to “swap troubled loans, circumvent credit-quality limitations, and double down on risky wagers, largely in an effort to ensure they can pass crucial compliance tests, even if a large swath of a CLO’s underlying loans lose value.” Many understand that having a bit of flexibility in an illiquid market is a good thing when prices fluctuate but argue that provisions like these create the potential for severe losses if the credit cycle truly turns.The same problem plagues the market for speculative-grade corporate bonds. Covenant Review, an independent research firm that analyzes debt documents for investors, published its 2019 year-in-review for the U.S. high-yield market this week and found many cases in which companies “ended up keeping some of the most dangerous and aggressive covenant provisions for bondholders.” A common strategy was for issuers to propose so many offensive covenants that even after a “hack and slash treatment to appease concerned bond investors,” they still got away with far more questionable terms than in the past.It would be one thing if bond investors were compensated for those risks — giving up some safety for yield is a classic trade-off. But, of course, that’s not the case.Rather, the yield on an index of double-B U.S. corporate bonds hit a record low of 3.47% this week. VICI Properties, a double-B rated real estate company that develops entertainment and hospitality centers, priced $750 million of five-year bonds with a 3.5% coupon, the lowest for that maturity in more than six years. To be clear, it’s not any better elsewhere up the credit spectrum, as yields on a Moody’s Corp. index of triple-B corporate bonds and a Bond Buyer index of municipal debt are both around the lowest since 1956. Even triple-C yields have fallen by 200 basis points in two months.Record-setting interest rates aren’t limited to America. In Austria, as my Bloomberg Opinion colleague Marcus Ashworth wrote, Erste Group Bank AG priced a so-called CoCo bond to yield 3.375%, the second-lowest coupon ever for the risky debt. And European high-yield bond sales are poised to top $11 billion this month, the most-ever for January.By now, it’s possible that the $100 trillion global bond market has simply become immune to reaching unprecedented levels. But the potential for complacency is scary, especially when someone like Bob Prince, who helps oversee the world’s biggest hedge fund at Bridgewater Associates, declares that the days of a boom-and-bust economic cycle are over.This brings to mind a piece of investing advice that has always stuck with me: Bull markets don’t end when everyone is on high alert for what could go wrong. It’s when everyone willfully chooses to ignore those warning signs that the cycle inevitably turns. The combination of weak credit protections and historically low yields on the riskiest corporate debt should be a clear red flag. Instead, when asked about financial-market bubbles, the one thing that came to mind for JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon was negative-yielding sovereign obligations. “Do you know anyone who’s actually bought a negative interest rate bond?” he asked CNBC’s Andrew Ross Sorkin. “I would never buy a negative rate bond. Not unless I was forced.”(1)I get it. It’s tempting to bash negative-yielding bonds and anyone who owns them. Even though it has been several years since sovereign-debt yields fell below zero in Japan and some European countries, the concept still boggles the minds of Wall Street veterans. Who would purchase a security that locks in a loss if held to maturity?But I would pose the same question to buyers of speculative-grade securities at these rock-bottom yields. If you’re still of the mind that economic cycles exist, then it stands to reason that the longest expansion in U.S. history is long in the tooth. Will a sub-3.5% yield on double-B bonds, or sub-5% on single-B bonds, be enough to cancel out principal haircuts in the case of default? Perhaps. But it’s worth remembering that lending to the wrong companies can also lead to losses — and possibly large ones — even if dicey companies have largely avoided disaster in recent years.Now, there are some nascent signs that investors are anxious about their ability to pick winners after years of just about every wager paying off. Bloomberg News’s Caleb Mutua this week highlighted research from Barclays Plc that showed junk bonds experienced a much sharper sell-off when downgraded in 2019 than in previous years. Usually, bond traders pride themselves on having superior information and being ahead of the credit raters. That confidence might be wavering.Whether those fleeting jitters turn into anything more remains to be seen. Certainly, the Federal Reserve and other central banks aren’t about to do anything to derail the economic expansion with inflation still in check. And as long as yields and spreads remain near these lows, investors probably won’t lose much sleep over the daunting record $1.2 trillion of U.S. speculative-grade debt that’s set to mature through 2024.Yet just because there’s no clear catalyst for a reversal today doesn’t mean investors are safe from a nightmare scenario in the future. At the very least, they should push for stronger protections when they buy new bonds or loans. As it stands, if and when the credit cycle turns and the losses mount, they’ll have no one to blame but themselves.(1) Bloomberg News's Liz Capo McCormick quickly pointed out that plenty of Americans own negative-yielding debt, through Vanguard’s Total International Bond Index Fund.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Japanese exports dropped more than expected in December, with the shipments slump dragging on for a 13th month despite recent signs of green shoots in global manufacturing.The value of shipments overseas fell 6.3% from a year earlier, weighed down by sliding exports of cars and auto parts, Ministry of Finance data showed Thursday. The result undershot the estimates of all 28 analysts surveyed by Bloomberg. The median forecast was for a 4.3% decline. December’s drop in overall exports extended the longest stretch of declines since 2016.Still, the report also showed strong gains in shipments of semiconductor-making equipment, adding to evidence of a bottoming of the global tech cycle. That’s a positive for Japan’s outlook, even if economists expect a recovery in the overall figure to be slow. Exports to China, the country’s single biggest overseas market, also inched up for the first time in 10 months.Key InsightsThe monthly data cap a miserable year for Japanese shipments abroad. Exports in 2019 fell 5.6% for the first drop in three years.The ongoing drop in exports adds to headwinds facing a Japanese economy forecast to have shrunk an annualized 3.7% in the fourth quarter as domestic factors, including typhoon damage and a hike in the sales tax, hit growth.Still, accelerating gains in shipments of chip-making equipment, which rose 25.8% in December, could indicate a turnaround in the tech industry, whose yearlong slump has been a large factor in Japan’s trade woes.“The bottoming out of the adjustments in the IT sector is a positive factor and that should support a recovery,” said Barclays economist Kazuma Maeda, who also said a clear rebound would take time.The phase-one trade agreement signed this month between the U.S.-and China should also brighten the outlook for shipments in 2020, though tensions could flare up again.In the near-term, there’s also less onus now on Japan’s exports to support growth since the Abe administration last month unveiled $120 billion in economic stimulus measures. The package was a big reason the Bank of Japan this week raised its growth forecast for the coming fiscal year, though it warned that overseas risks still need careful monitoring.What Bloomberg’s Economist Says“The phase-one trade deal is positive, in that it could help lift demand from China. Without a stronger performance in the U.S., though, exports are likely to remain sluggish overall..”\--Yuki Masujima, economistClick here to read more.Get MoreImports slid 4.9% in December, compared with economists’ median estimate for a 3.2% drop.The trade balance was a 152.5 billion yen deficit, roughly in line with analysts’ forecasts.Exports to the U.S. dropped 14.9%, while those to Europe fell 5.6%.Car shipments slid 11.8%; auto parts declined 10.9%.On the positive side, shipments to China edged up 0.8%, led by a near 60% surge in chip equipment to the market.Overall shipments of semiconductor-making equipment rose 25.8%, much better than the average double-digit declines of April-September. Chip exports increased by 2.6%.(Adds economists’ comment and detail throughout.)\--With assistance from Toru Fujioka.To contact the reporter on this story: Yuko Takeo in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Malcolm Scott at email@example.com, Jason Clenfield, Paul JacksonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Britain's regulators should have a formal role after Brexit to keep the financial sector globally competitive and less prone to "gold-plating" international norms, an industry think tank said on Thursday. The International Regulatory Strategy Group (IRSG) said new thinking and targeted reforms were required after Britain leaves the European Union on Jan. 31.
(Bloomberg) -- China’s fragile economic stabilization could be at risk if authorities fail to contain the new virus currently sweeping across Asia, economists have warned.UBS Group AG, Nomura Holdings Inc. and Barclays Bank PLC reached back to the 2003 SARS outbreak for guidance on potential impact.UBS noted that “history does not repeat itself, but it rhymes,” while Nomura said that based on the outbreak 17 years ago, it expects “increased downward pressure on China’s growth, particularly in the services sector.” Barclays expects the “economic impact from the virus is likely to be transitory, with the effects felt more in transportation and retail sales.”Chinese officials are stepping up monitoring of domestic transport links as the death toll increased to nine from six previously. Health officials around the world are racing to gauge the danger posed by the SARS-like virus as confirmed cases have stretched to five additional countries, including the first diagnosis in the U.S.While the virus’s arrival in the U.S. highlights the dangers of it spreading and impacting economies around the world, even if it’s contained to China, there would still be a hit to global growth. That’s because China’s weight has more than doubled since the 2003 SARS epidemic. It is estimated to account for about one-fifth of the world economy this year, compared with 8.7% at the time of SARS, International Monetary Fund data show.What Bloomberg’s Economists Say...“The changing structure of China’s economy increases the risks. A larger services sector and bigger role for consumption mean a disease outbreak that hits shopping, eating out, and other leisure activities will have a bigger impact. A larger role for financial markets means more potential for shocks to trigger a blow to sentiment.”\--Tom Orlik and Chang ShuTerminal clients can read the full note HEREUBS economists Wang Tao and Ning Zhang noted the ongoing peak travel season around the Lunar New Year “is a tremendous challenge, which could complicate the disease diffusion.”“If the pneumonia couldn’t be contained in the short term, we expect China’s retail sales, tourism, hotel & catering, travel activities likely to be hit, especially in Q1 and early Q2,” UBS said. “Our forecast of sequential growth rebound in Q1 and Q2 2020 would face some downside risk. The government would likely strengthen its policy easing to offset the shock from the pneumonia, especially for those directly affected sectors.”Barclays economists including Chang Jian also see prospects for targeted credit and fiscal support if the spread intensifies.(Updates with Barclays comments in the third paragraph.)\--With assistance from Garfield Reynolds.To contact the reporter on this story: Michael Heath in Sydney at firstname.lastname@example.orgTo contact the editors responsible for this story: Malcolm Scott at email@example.com, James MaygerFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The worst-case scenarios for Boeing Co.’s 737 Max crisis no longer look far-fetched.The airplane maker said Tuesday that its “best estimate” for when regulators will lift a flying ban on its Max jet is now mid-2020. The once top-selling plane has been grounded since March following two fatal crashes. The updated timeline reportedly reflects a new, recently discovered software flaw connected to how the Max’s flight computers power up and verify they’re receiving valid data, as well as the need to correct vulnerabilities in certain wiring bundles. Boeing said it’s also accounting for “further developments that may arise in connection with the certification process.”Perhaps the company is finally taking a more conservative attitude toward the Max crisis after a series of overly optimistic promises left its reputation in tatters and CEO Dennis Muilenburg without a job. The Federal Aviation Administration, for its part, reiterated that there’s no time frame for the Max’s return and that safety is its first priority. Airlines and suppliers now have to recalibrate accordingly, and this latest delay will be by far the most painful for them.With its stockpile of undeliverable jets growing and its cash burn deepening, Boeing had already made the call to halt production of the Max once it became clear it wouldn’t meet its previous deadline for a return to service by the end of 2019. The shutdown, which began in January, has already forced suppliers to idle their factories as well and, in some cases, to lay off employees. In one of the more extreme examples, Spirit AeroSystems Holdings Inc., which gets more than half its revenue from the Max, saw the rating on its debt cut to junk by Moody’s Investors Service earlier this month and is cutting about 2,800 workers. In total, economists from Barclays and JPMorgan Chase & Co. estimated the Max production shutdown could subtract half a percentage point from U.S. gross domestic product in the first quarter. Investors were expecting total compensation to affected airlines to amount to about $10 billion, according to a survey conducted by Bernstein analyst Douglas Harned. If that sounds bad, consider that the baseline case among investors and analysts before Tuesday’s update was that Max deliveries would resume by March or April.The major U.S. airlines have all pulled the Max from their schedules through June in what they thought would be a conservative call. The logistical challenges of bringing jets out of storage and putting pilots through the simulator training that Boeing has now decided to recommend means that the airlines will likely have to go without their Max fleets for yet another peak travel season. That is likely to drive even more market share toward Delta Air Lines Inc., which doesn’t fly the Max and has been benefiting from that fact. The longer the grounding lasts, the more permanent those share gains may be. Either way, expect airlines to significantly increase their demands for compensation.The biggest pain will be felt by Boeing’s suppliers. A three-month production shutdown is one thing; a six-month halt is something else, entirely. Getting supplier factories humming to the point where they could meet Boeing’s Max production pace required a logistical miracle and some parts-makers actually used the first few months of the grounding to play catch-up. At a minimum, suppliers run the risk of workers leaving for more secure jobs amid a buoyant labor market. Taco Bell is offering a $100,000 salary for a restaurant manager position, for heaven’s sake. For others, the damage may be more lasting. Boeing enjoys an effective duopoly with Airbus SE that has helped buoy profits over the years and arguably protected it from greater financial pain in the form of canceled Max orders. The flip side of that is that some suppliers depend heavily on Boeing for their business. The biggest producers such as General Electric Co., Honeywell International Inc. and United Technologies Corp. will be able to weather the hit from a prolonged production halt; smaller suppliers risk going bankrupt.This will all come back to haunt Boeing once it’s finally ready to restart production. With a legitimate debate about the sustainability of air traffic growth at the levels needed to maintain demand, it’s not out of the question that the company might not ever reach its target of producing 57 Max jets per month. Air Lease Corp. Chairman Steven Udvar-Hazy said Monday that his company had urged Boeing to drop the Max name to make the plane more palatable for fliers. But the longer the grounding drags on, the likelihood increases that Boeing will need to make more than just a name change for the latest iteration of its 737 model and instead plow billions into a true successor. To contact the author of this story: Brooke Sutherland at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Tom Kalaris, a defendant in the Serious Fraud Office’s landmark fraud prosecution of three ex-Barclays bankers, was likened to a “professional soldier” because of his “highly developed sense of duty” by David Walker, the City veteran who chaired the bank between 2012 and 2015. Barclays turned to Qatar and other overseas investors twice in 2008 for a total of £11.2bn, which ultimately kept it from a bailout by the UK taxpayer.
The U.S. Federal Reserve on Friday signaled it would take a lighter touch when supervising banks, in another win for the industry which has long complained that the regulator's closed-door supervisory process is opaque and capricious. In particular, foreign lenders Deutsche Bank, Credit Suisse, UBS and Barclays should no longer be held to the same supervisory standard as big U.S. banks after shrinking their combined U.S. assets by more than 50% over the past decade, said Fed governor Randal Quarles. "We have been giving significant thought to the composition of our supervisory portfolios and, in particular, to whether and how we should address the significant decrease in size and risk profile of the foreign firms," Quarles, who is also vice chair for Fed supervision, told a Washington conference.
(Bloomberg) -- The Bahamas may need to tap international debt markets as it confronts the steep cost of recovering from the most destructive hurricane ever to hit the islands.The government will probably borrow about $500 million in coming months as it deals with the roughly $3.4 billion in losses and damages from Hurricane Dorian, said K. Peter Turnquest, the Caribbean nation’s finance and deputy prime minister. The government is weighing options for how it will raise the debt, with some combination of an international bond sale and local borrowing likely, he said.Dorian sat over the Bahamas in early September, killing dozens, causing widespread flooding and ripping apart thousands of homes and businesses. The storm’s aftermath has wrecked the government’s fiscal plans, as it faces a slowing economy and the costs of reconstructing the islands so they can withstand the types of massive storms that have wrought devastation across the Caribbean in recent years.“In pure dollar terms this is absolutely the worst possible outcome and worst loss that we’ve ever seen,” Turnquest said in a telephone interview. “It is presenting a monumental challenge not only in terms of meeting reconstruction needs and costs but also for rebuilding in a way that is resilient and that will meet the anticipated frequency and severity that is being predicted as a result of this climate crisis.”The storm destroyed parts of Grand Bahama and Abaco islands, which sit about 100 miles east of Florida in the Atlantic Ocean and make up slightly less than a fifth of the tourism-dependent $12 billion economy. A revenue shortfall of about $230 million for the fiscal year ending June 30 and roughly $300 million in new spending is derailing its plans to cut debt levels.Read more: As Climate Change Fuels Storms, Time to Leave Coasts?: QuickTakeThe country was on a path to reduce debt to 50% of gross domestic product by 2024 from around 59% in 2018 by a steady tightening of budget deficits. Now, deficits are widening, and debt is expected to hover above 60% of GDP until 2024, according to government projections.Despite the disastrous storm, Bahamas debt returned 16.4% last year, ahead of the Bloomberg Barclays Emerging Markets USD Sovereign index’s 13% return, according to data compiled by Bloomberg.The government expects “significant progress” in rebuilding damaged areas this year, but it will take about three years before they’re full restored, Turnquest said. Reconstruction spending and inflows from insurance claims should help boost economic growth.A handful of major foreign investment projects remain on track, including a Disney Island Development Ltd. facility worth between $250 million and $400 million, and one of Carnival Corporation‘s largest cruise ports, planned for Grand Bahama, according to a government economic plan.Still, the government needs more investment and technical assistance to help it rebuild in a way that makes the islands less vulnerable to future storms, Turnquest said. Among other things, it wants to construct “resilient” infrastructure, renewable energy generation, disaster-resistant shelters, and to implement a payment system that will leave residents less reliant on cash, he said.“We are looking to the international community not to turn away from this issue but to commit and invest and help us figure this out,” he said.To contact the reporter on this story: Ezra Fieser in Bogota at firstname.lastname@example.orgTo contact the editors responsible for this story: Nikolaj Gammeltoft at email@example.com, Brendan WalshFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Barclays Plc is embarking on a plan to cut about 100 senior jobs, mostly in trading roles across its corporate and investment bank, as the British lender seeks to rein in costs.The bank has started trimming mainly managing director and director positions in London and Asian financial hubs, according to people familiar with the matter, who asked not to be identified as the details aren’t public.A spokeswoman for Barclays in London declined to comment on the cuts, which are among the first to be implemented by a major investment bank in 2020. Last year saw several European lenders reshape their securities units, eliminating thousands of roles amid increasing competition from U.S. peers and a lackluster home market.Jonathan Kitei, head of securitized product sales for Americas, Tim Johnston, head of EMEA cash high-touch trading and sales, and Anindya Das Gupta, head of treasury in India, are leaving the bank as part of the cuts, people familiar with the matter said. All three declined to comment.About a dozen positions in Asia have been hit, though the cuts won’t result in a retreat from any business or market in the region, one of the people said.The bank reports its full-year results in February. The corporate and investment bank outperformed Wall Street peers in the third quarter, as revenue from fixed-income and equities trading advanced. Chief Executive Officer Jes Staley, who has clamped down on expenses as he seeks to reach profitability targets, nevertheless said in October that “the outlook for next year is unquestionably more challenging now than it appeared a year ago.“Last year, he said Barclays cut 3,000 jobs in the second quarter. In the bank’s 2018 annual report, Barclays said global headcount was more than 83,000.Banks announced almost 80,000 job cuts last year, the most since 2015, with the vast majority of that sum in Europe. Societe Generale SA and Deutsche Bank AG are among other European lenders who have recently cut headcount.(Updates with details in fourth and fifth paragraphs)\--With assistance from Cathy Chan and Stefania Spezzati.To contact the reporters on this story: Anto Antony in Mumbai at firstname.lastname@example.org;Donal Griffin in London at email@example.com;Suvashree Ghosh in Mumbai at firstname.lastname@example.orgTo contact the editors responsible for this story: Ambereen Choudhury at email@example.com, Marion Dakers, Keith CampbellFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Peak gold production is looking a little more distant. Global supply of the yellow metal has been inexorably approaching its high-water mark, as ore is extracted faster than new discoveries are made. Mines have been aging fast. A sustained price rally can change that picture, as investors rekindle their enthusiasm for large-scale exploration and technological innovation. Bullion miners’ margins will benefit.Gold is coming out of a long period in the investor wilderness. Last year marked the biggest annual gain in prices since 2010. It broke through $1,570 last week — the highest in almost seven years. Gold prices are driven by factors that aren’t always predictable, but there’s certainly scope to go higher, with interest rates low and geopolitical tensions simmering. Holdings of gold in exchange-traded funds, popular with retail investors, are near 2012’s lofty levels. Central banks remain buyers too.This isn’t a repeat of 2011, when gold cracked a gravity-defying $1,900 per ounce — at least, not yet. The all-time high remains some way off, despite a handful of analysts already pointing to $2,000 gold. But the impact of higher prices is already trickling down. All-in sustaining cash costs remained at around $934 per ounce for the largest producers in the third quarter of 2019, according to Bloomberg estimates. The industry measure, though rising, makes for healthy margins. Barrick Gold Corp., for example, reported third-quarter free cash flow of $502 million, compared to $55 million in the previous three months.Last year’s flurry of M&A speaks to that exuberance: from Barrick Gold’s merger with Randgold Resources Ltd., completed that January, to Goldcorp Inc.’s union with Newmont Corp., plus a string of opportunistic offers among smaller companies, and imaginative deals like Barrick’s Nevada joint venture with Newmont. Overall, 2019 marked a return to levels last seen during the boom.There’s more to come, especially among smaller players. Diverging levels of bullishness, after years of homogenous forecasts, will create opportunities for miners to expand portfolios.But the deal spike tells a supply story too, and those numbers are grim even after miners pair up, with reserves down steadily for much of the past decade. The average life of a gold mine shrank to 11 years by 2018 from 16 in 2012, according to consulting company Wood Mackenzie Ltd. Back in 2015, as prices fell toward $1,000 an ounce, the World Gold Council warned that the industry was nearing “peak gold,” after which output would begin to decline. That’s still a threat.Tie-ups are no panacea. The trouble is there’s no short-term link between gold prices and supply. Sure, marginal projects become viable, but that’s a transient boost. Also, the lag effect means mines commissioned in boom years will still take years to come into production. Meanwhile, the scars of the 2011 excesses will make miners reluctant to change their assumptions for the long-term gold price, which are largely still at or below $1,300.The good news is that this works both ways. Higher supply, through exploration or innovation, also won’t depress prices.That should increase enthusiasm for exploration. Budgets have shrunk and success rates have been decreasing, even if gold continues to command the lion’s share of the mining sector’s exploration outlays. So far, spending has increased largely on existing projects rather than new finds. Splashy budgets don’t guarantee success, but the supply numbers will have to rise. There are already signs of long-awaited projects accelerating, such as Polyus PJSC’s Sukhoi Log in Siberia. Then there is investment in technology. This isn’t only to automate and electrify fleets, but to upgrade exploration and processing techniques. For gold, processing improvements could make even complex, refractory ore — resistant to more common extraction methods — attractive. Barclays Plc estimated in December that innovation could add 10% of incremental supply growth through 2025. Cost per ounce may come down 4%. That’s a target worth aiming for. To contact the author of this story: Clara Ferreira Marques at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Clara Ferreira Marques is a Bloomberg Opinion columnist covering commodities and environmental, social and governance issues. Previously, she was an associate editor for Reuters Breakingviews, and editor and correspondent for Reuters in Singapore, India, the U.K., Italy and Russia.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Antoine Dréan, chairman of private-equity advisory Triago, has published his 10 ‘outrageous’ predictions for 2020.
Former Barclays chief executive John Varley first suggested the bank could use a side deal to satisfy Qatar's demands for extra cash in return for rescue funding for the bank during the 2008 credit crisis, a London court heard on Tuesday. Thomas Kalaris, one of three former top Barclays bankers who deny fraud linked to the capital raising, on Tuesday described a meeting with a senior Qatari official on June 3, 2008, and how he subsequently took the service lift to Varley's office on the 31st floor of the bank to discuss the Gulf state's fee demands. The case revolves around how Barclays avoided the fate of Lloyds and Royal Bank of Scotland and averted a state bailout with an 11 billion pound ($14.3 billion) fundraising in June and October 2008.
(Bloomberg Opinion) -- As ransomware attacks go, the cyber intrusion at Travelex that emerged on New Year’s Eve could have lasting consequences — and ones that shouldn’t be just a worry to the currency dealer.Travelex, known mostly for its airport shops and ATMs, was forced to resort to manual dealings and handwritten receipts for foreign exchange sales as it took systems offline to prevent the malware Sodinokibi, also known as REvil, from spreading. Core activities were crippled or halted altogether during what would have been busy trading days, across dozens of countries.Worse still, the company has had to repeatedly deny claims by its attackers that customer data has been stolen, a violation of security that if true would result in a further loss of client trust — and hefty regulatory fines. Under the European General Data Protection Regulation, companies can be sanctioned as much as 4% of annual turnover if appropriate security measures aren’t in place or if the company fails to notify regulators promptly.As of Monday, Travelex hadn’t notified the U.K. Information Commissioner’s Office of a breach and it didn’t have evidence data was compromised. Earlier in the day, the company said it was finally restoring customer-facing systems. Meanwhile, London’s Metropolitan Police is investigating.Travelex’s attackers appear to have known how to strike where it hurts. As the U.S. Federal Bureau of Investigation warned in October, losses from ransomware are increasing even though the number of attacks is declining, a sign that criminals are becoming more sophisticated.Indeed, the dent to Travelex’s reputation and the effect that could have on its business with corporate customers could be considerable. The outage disrupted delivery of cash from its vaults to international banks, and the online suspension of dealings forced corporate clients to stop some services they offer their own customers. Some of the world’s biggest banks, such as Barclays Plc and HSBC Holdings Plc, have been affected.The disruptions prompted a warning from S&P Global Ratings on Travelex’s finances and its creditworthiness as a standalone business. S&P was concerned about the adequacy of Travelex’s controls and governance, and whether the company will be able to renew corporate contracts. Cash from its parent Finablr Plc (owner of six other brands including money-transfer firm UAE Exchange and Ditto digital bank) would help meet liquidity needs but funds haven’t yet been committed.Travelex may have added to its pain with a sloppy public response. The drip-feed of information on the impact of the breach (initially Travelex said the website was down for planned maintenance) will make regaining confidence harder. Its customer data has been somewhat compromised in the past too. In March 2018 Travelex suffered a breach, which was disclosed in Finablr’s prospectus when it sold shares to the public last year.While the company contends that there’s no evidence customer data has been stolen in the Sodinokibi attack, there are reports alleging that the hackers claiming responsibility have demanded as much as $6 million in ransom to stop them releasing data publicly. Travelex isn’t commenting on the ransom request. The FBI in recent guidance acknowledged there will be circumstances under which companies may have no choice but to cough up if they’re struggling to do normal business. Meantime, insurers have spotted a financial opportunity, helping to shield firms from the risks, while fueling some concern that they’re urging customers to meet criminals’ ransom demands with extra haste. The more sophisticated the attacks, the greater the pressure on victims to put the fire out quickly. Travelex is a reminder of what’s at stake.To contact the author of this story: Elisa Martinuzzi at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- At this point, few superlatives are left to describe how historically expensive the bond market looks. The 30-year Treasury yield is just a few months removed from an all-time low of 1.9%. U.S. investment-grade corporate debt just posted its best year since 2009, returning 14.5%. Junk bond yields hit a five-and-a-half-year low of 5.08% and could keep going.Jeffrey Gundlach, DoubleLine Capital’s chief investment officer, sounded off on some of this during his annual “Just Markets” webcast earlier this week. He said long-dated Treasury yields are bound to rise and that double-B rated junk debt is one of the worst fixed-income investments available. But it’s his deputy CIO at DoubleLine, Jeffrey Sherman, who has a measure of the unprecedented market that might just be the scariest gauge of all for bond traders.The “Sherman Ratio” measures the yield on a bond, mutual fund or index relative to its duration. Consider the Bloomberg Barclays U.S. Aggregate Bond Index (frequently called “the Agg”). This ratio, which effectively shows the amount of yield investors receive for each unit of duration, is close to the lowest level ever, meaning it would take a smaller move higher in interest rates to wipe out the income return on a fund tracking the index:A drop of this magnitude in any ratio usually requires the numerator (in this case, yield) to fall while the denominator (duration) increases or at least holds steady. That’s exactly what happened in 2019. The yield on the Agg dropped 97 basis points, to 2.31% from 3.28%, while duration was unchanged at 5.87 years. At first glance, that move doesn’t seem so out of the ordinary. After all, the benchmark 10-year Treasury yield fell 77 basis points during 2019, so it follows that the broader bond market, which includes a large chunk of U.S. sovereign debt and agency securities, would do something similar. Digging a little deeper, it’s the corporate-bond market where the trend looks truly frightening.The Bloomberg Barclays U.S. Corporate Bond Index posted a record-low yield-to-duration ratio just last week after a relentless decline in 2019. The reason is simple: Like the rest of the debt markets, the index yield tumbled last year, by 136 basis points. But unlike the Agg, which had no change in its duration, the duration of the corporate-bond index surged to 7.89 years from 7.1 years, the biggest yearly increase in three decades. Before shrugging off the record low as not far off from previous troughs in mid-2016 and mid-2013, it’s worth noting that the share of the corporate-bond index rated in the triple-B tier has surged in recent years. Triple-Bs are now slightly more than 50% of the index, up from 42% in 2013. So even though the investment-grade index has become riskier on the whole, the yield pickup hasn’t reflected it.This has significant implications for anyone invested in a passive mutual fund or exchange-traded fund that tracks the Agg or the broad corporate-bond market. DoubleLine explained it well in a 2015 report:“Particularly helpful when comparing funds, the Sherman Ratio, the result of yield divided by duration, allows one to easily calculate what percentage increase in rates will offset a bond fund’s yield. For example, it would take a 100 basis point rise in interest rates over twelve months to offset the yield of a fund whose Sherman Ratio equals 1.0. The lower the Sherman Ratio, the less rates need to rise to offset one’s yield.” This also shines some light on a phenomenon I wrote about last month: The collapsing yield spread between triple-B and double-B rated bonds. The difference reached just 33 basis points on Dec. 18, the smallest in at least 25 years.Part of that story is that investors are clamoring for companies with double-B credit ratings because they’re speculative grade and offer extra yield while still having relatively little default risk. But the other reason for the tightening spread comes back to duration. While the modified adjusted duration on the triple-B index rose in 2019 to 7.86 years from 7.1 years, the duration on the double-B index plummeted by the most on record, to 3.51 years from 4.35 years. When adjusting the indexes for their changes in duration, the yield-spread compression looks far less dramatic.Of course, these stealth changes to duration are only alarming if interest rates move higher. For now, the Federal Reserve has signaled it will take a material change in the economic outlook for officials to consider lowering interest rates again, and the bar for raising rates is so high that many see it as practically nonexistent. The one wild card is a bigger-than-expected increase in inflation, which investors like BlackRock Inc. say is a real risk in 2020.Gundlach, for his part, also sees a good chance that inflation will pick up. He said in his webcast that the the 10-year Treasury yield should be around 2.1% or 2.2%, which implies a roughly 40-basis-point increase from current levels. As the Sherman Ratio on the Agg makes clear, a move of that magnitude would be enough to about wipe out its yield.“One thing that seems clear as the decades have rolled on with this debt scheme, it takes less and less of a rate rise to break the economy,” Gundlach said. “We keep getting lower and lower interest rates that precede recessions, and that seems likely to be the case this time.”The same holds true for bond investors. The income cushion they once enjoyed just isn’t there anymore. Since 1974, U.S. Treasuries have posted negative annual total returns only four times. Two of those were in the last decade. Similarly, since 1981, corporate debt has lost money just six times, but that includes three of the past seven years.The bond market feels as if it’s at a crossroads. Perhaps that’s why so many forecasts for 2020 are for benchmark yields to trade in a range and for credit markets to produce a return that equals their interest payments. There’s not much room for interest rates to fall, but there’s little reason to expect they’ll move higher in a hurry, either.Thus the importance of the yield-to-duration ratio. It’s a simple reminder that lower-for-longer interest rates come with their own set of risks. In a market full of superlatives, it takes less and less to shake up the status quo.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- CLSA Ltd. is losing its identity. That’s bad news for its parent’s ambitions to build a globally competitive Chinese investment bank in the mold of Goldman Sachs Group Inc. Citic Securities Co. is tightening control over CLSA following an exodus of employees and top executives from the Hong Kong-based brokerage last year, Cathy Chan of Bloomberg News reported Wednesday, citing people familiar with the changes. China’s biggest broker is creating a “coordination committee” at CLSA that will include Citic Securities’ president and chairman, an interim step toward reordering a decision-making structure that’s seen as too independent, they said.Once dubbed the “insane asylum” by former Chief Executive Officer Jonathan Slone for its nonconformist ideas, CLSA has lost a lot of its luster since the 2013 takeover as the brokerage’s independent-minded research, which included opinions critical of China’s Communist Party and led to a culture clash with its parent, a unit of state-owned Citic Group.CLSA, with 21 locations across the world, hasn’t brought the benefits of an international network that Citic might have hoped for. Revenue from Citic Securities’ international operations declined 3% annually between 2014 and 2018, according to Bloomberg Intelligence analyst Sharnie Wong. By contrast, smaller Chinese rival Haitong Securities Co. has recorded average growth of 21% at its international unit. Under pressure to cut costs, Citic shuttered CLSA’s American equities business in 2017.While that was an understandable move, the squeeze has dented morale at CLSA and damaged its standing with international clients — the very people who were meant to vault Citic into the top tier of Wall Street heavyweights. CLSA has also been hurt by the implementation of the European MiFID II regulations that forced fund managers to pay for research. Many ditched smaller-scale firms such as CLSA, which fell to eighth in the rankings for Asian equity research market share last year, having once been in the top three, according to data from Greenwich Associates.There is some logic to Citic’s tightened grip. CLSA needs to boost its exposure to mainland China, a growth area for brokerage research as the inclusion of domestic shares and bonds in the MSCI and Bloomberg Barclays indexes drives billions of dollars of foreign money into its markets. International investors are ever more interested in the A shares Citic Securities covers, as opposed to the Hong Kong-traded shares in which CLSA has long specialized.The Chinese brokerage needs to buffer itself against stiffer competition on its own turf. China is opening up its $45 trillion financial industry, allowing foreign firms like Goldman Sachs and UBS Group AG to fully control their domestic investment operations. As foreign fund managers such as Blackrock Inc. boost their presence in the country and seek out more familiar advisers, that could threaten Citic’s reign as China’s top brokerage.Here’s where integrating CLSA into the mothership could prove self-defeating for China’s ambitions of creating an “aircraft-carrier sized” investment bank that can compete globally. The value of an investment bank’s brand lies in its people and their connections, and few global names have been run successfully from Beijing. In subsuming CLSA within the state-owned company structure and stamping out its idiosyncratic ways, Citic risks being left with little more than a nameplate and the fading memory of a once-formidable global reputation. To contact the author of this story: Nisha Gopalan at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Middle Eastern markets can hardly be accused of complacency over the latest surge in regional tensions, even if global investors are taking a more relaxed view of events.The region accounts for three of the world’s 10 worst-performing equity indexes since the U.S. drone attack that killed Iran’s General Qassem Soleimani last week, while the dollar-denominated bonds of Iraq, Lebanon, Bahrain, Egypt and Oman are among the 10 biggest losers in emerging markets.Though the declines may not be surprising for a part of the world routinely roiled by political spats and conflicts, the current selloff may contain a new element. More foreign money is invested in the region than ever before. According to EPFR Global data cited by ING Groep NV this month, the Middle East and North Africa accounted for about 13% of emerging-market funds at the end of last year, compared with less than 4% five years earlier.“The investors to whom I speak, long-term trends notwithstanding, are steering clear of equity markets in the region at present,” said Julian Rimmer, a trader with Investec Bank Plc in London. “There is too much uncertainty. Without an all-out, widespread military conflict we may be at peak volatility now but that doesn’t mean volatility won’t remain elevated for an extended period of time.”Most Middle East markets extended their declines on Wednesday and oil rallied after Iran attacked two U.S. bases in Iraq with more than a dozen missiles. Dubai’s DFM General Index fell the most, losing 1.2%. Saudi Arabia’s Tadawul slipped 0.9%, with oil giant Saudi Aramco dropping a fourth straight day.Read: U.S.-Iran Tension Exposes Fragile Middle East EconomiesGlobal investors are paying more attention to the region following record bond sales and the inclusion of Gulf Arab economies in JPMorgan Chase & Co.’s emerging-market bond indexes last year. Billions of dollars more will flow in when MSCI adds Kuwait to its main emerging-market stock benchmark in June, following Saudi Arabia’s inclusion last year.Washington and Tehran have been engaged in a game of brinkmanship since the U.S. withdrew from the Iranian nuclear deal in 2018. The Islamic Republic’s retaliation marked an escalation in the confrontation, prompting world leaders to urge restraint.“This time it’s different,” said Sergey Dergachev, a senior money manager at Union Investment in Frankfurt. “Most investors, like ourselves, stay invested in the region and remain in waiting mode for the rhetoric to calm down a little bit. But crucial analysis of countries and corporates that might be severely affected by any potential escalation of conflict is essential.”To contact the reporter on this story: Netty Ismail in Dubai at firstname.lastname@example.orgTo contact the editors responsible for this story: Alex Nicholson at email@example.com, Justin Carrigan, Paul WallaceFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.