08 July 2015
Greece failed to make the repayment of an approximately €1.5bn due to the IMF on 30 June 2015 (European time). Gerry Rice, director of Communications confirmed Greece was “in arrears and can only receive IMF financing once the arrears are cleared”. He also said the Greek government requested the IMF grant an extension and that the request would go the IMF’s executive board for consideration. The IMF states on its website it “does not extend payment terms as a matter of longstanding policy.”
The Greek government said it would hold a referendum and Greek voters would decide if Greece should accept the EU conditions and thereby qualify for more loans or back the Greek government position and hold out for better terms from its EU creditors. However, in a leaked letter sent to its EU/IMF creditors on Tuesday the Greek prime minister said Greece was “prepared to accept” a deal set out over the weekend by the creditors as long as there were some small modifications made. Tsipras linked Greece’s acceptance of the terms to a new package of bailout aid that would need to be negotiated. Both the prime minister and the finance minister have indicated they would resign if Greek voters came back with a “Yes”.
According to the BoE Deputy Governor Jon Cunliffe there was no sign of the Greek problem spreading to other countries. “Financial markets are not showing there is contagion or spreading of risks to the periphery… we are not seeing signs of pressure on Portugal, Spain and Ireland.” Spreads have widened this week but not as much as in 2011-12. Portuguese 10-year bond spreads, for instance, reached 2.44 percentage points on Monday, some 0.67 percentage points wider than on Friday. In 2012 they had soared as high as 15.6 percentage points.
Greek banks are closed until 7 July and the amount of money which can be withdrawn is limited to €60 per day.
08 July 2015
Janus Capital, the fund manager where ‘Bond King’ Bill Gross settled after leaving PIMCO, is buying Kapstream Capital, the Australian active bond fund co-founded by Kumar Palghat and Nick Maroutsos. The relationship with Gross is said to go back a long way when Palghat worked at PIMCO a decade ago and will see Palghat co-manage the global unconstrained fund with Mr Gross.
The deal is said to be for 51% of the business for a $111m upfront cash payment and with an option to buy the balance of 49%. Kapstream is partially owned by its management and Challenger through its Fidante Partners incubator group and is well-regarded for its unconstrained global fixed income portfolio. Janus Capital chief executive Dick Weil said: “This transaction underscores three key commitments at Janus. “First, we want to be the place where great investors come to invest. Kapstream’s Kumar Palghat, Steve Goldman and Nick Maroutsos are simply great people and great investors. Second, we passionately believe that given volatility in global rates, investors need excellent fixed income choices that offer less exposure to interest rate risk. Third, the acquisition of Kapstream furthers our commitment to expand our fixed income capabilities as part of the firm’s intelligent diversification strategy.”
As at 31 May 2015 Kapstream manages $3.7bn in its absolute return fund, $3.6bn in the absolute return income fund and $1.9bn in the sovereign bond and cash portfolio, a total of $9.2bn funds under management.
08 July 2015
ANZ have revised down their growth forecasts for Australia. GDP is now expected to come in at 2.3% for 2015 (down from 2.5%) and 2.6% for 2016 (down from 3.0%). Major reasons for the downgrade were weaker household consumption and non-mining business investment. ANZ still expects unemployment to peak at around 6.5%.
08 July 2015
The governor of Puerto Rico said the island, a US common wealth, could not pay back its estimated US$70bn in debt. Garcia Padilla said the country needed to postpone for several years its debt payments while the island sought to return its economy to growth. “The first step is to revive economic growth…[otherwise] we will never get out of this vicious cycle…”
08 July 2015
Last week’s rate cut in China (the 4th since November) was combined with a cut to the amount of cash that banks must hold as reserves. The last time there was a simultaneous cut to interest rates and reserve requirements was at the height of the GFC in late 2008. China’s economy is looking decidedly sluggish by its standards and the latest move is seen as an attempt to revive growth.
08 July 2015
Transurban announced the issue of $900m of secured notes by its 62.5% owned subsidiary Queensland Motorways. The issues consists of tranches of $200m, $300m, and $400m maturing in 10, 12 and 15 years respectively. The notes were placed with US investors and the purpose was to refinance Queensland Motorwayss’ upcoming debt maturity. Transurban CFO Adam Watson said the issue was part of the group’s strategy and it would “double the average length of Transurban Queensland’s debt book to over six years.”
08 July 2015
Over two thirds of BrisConnection’s lending group agreed to the sale of AirportLinkM7 toll road when the debtholders met on 26 June. The “yes” vote was just enough for advisers Macquarie Capital and Fort Street Advisers to push ahead with an auction. Lenders took control of BrisCon’s AirportLink in February 2013. Macquarie Group owns more than one-third of BrisCon’s $3.6 billion debt pile. Other lenders include ANZ Banking Group, Belgium’s KBC, United Overseas Bank and UniCredit Group.
08 July 2015
Nederlandse Waterschapsbank and Eurofima each added to their existing 2025 kangaroo bond lines by issuing $30m and $35m respectively last week.
08 July 2015
Australian private sector credit outstanding rose by 0.5% in May which was in line with consensus. The figure follows a lower-than-average April figure and according to UBS is the fastest since January 2009.
US unemployment dropped to a 7 year low of 5.3% in June as the country added 223k jobs. This was below market expectations of 233k. The previous 2 months were revised down by a total of 60k suggesting the pace of jobs growth was slowing a little. The Fed has said it would likely raise rates this year and this latest number makes it harder for the Fed to justify near-zero interest rates.