Date
5/31/2016 5:51:22 AM
(MENAFN- ProactiveInvestors - UK) Fuller Treacy Money, 07:19
Strategy and Timing
Thanks very much to a subscriber for arranging an invitation to yesterday's DoublieLine presentation by Jeff Gundlach which was something of a victory lap for the firm as they are now within striking distance of $100 billion under management.
Eoin Treacy's view
Here is a link to the slides.
Mr. Gundlach's opinion, and I agree, is that negative interest rates are inherently deflationary. How could they not be, you deposit money and get less back. He was quick to point out however that central banks don't appear to have realised that yet and are likely to push the policy further before abandoning it and trying something else. He believes it is only a matter of time before some form of helicopter money policy is employed somewhere. That helps explain his medium-term bullish view on gold.
Indonesia Sailing Toward Upgrade as Last Major Asian Junk Debt
This article by Lilian Karunungan for Bloomberg may be of interest to subscribers. Here is a section:
Indonesia's status as Asia's last major economy without a full-investment grade may be near an end, boosting the appeal of the region just as other emerging markets such as Brazil and Poland suffer downgrades.
State-Owned Enterprises Minister Rini Soemarno said in Jakarta on Wednesday she expects an S & P Global Ratings upgrade in June, after the finance minister said May 11 the firm's officials were impressed during a visit. Indonesia's international bonds returned 10.1 percent this year, while its domestic bonds advanced 10 percent, both the best in emerging Asia, JPMorgan Chase & Co. indexes show. The cost to protect sovereign debt against non-payment dropped the most in Asia after Vietnam, sliding 41 basis points to 194 basis points.
Schroder Investment Management Ltd., Aberdeen Asset Management Plc and Natixis Asset Management are all predicting an upgrade as President Joko Widodo seeks to pay for better infrastructure by cutting fuel subsidies. Philippine peso sovereign debt rallied 7.7 percent this year as an incoming government sought to defend its full investment grade status, Bloomberg indices show. Bonds in Brazil delivered losses this month as its rating was cut, while the Polish zloty tumbled after the nation was downgraded in January.
'Once you become fully investment grade, it triggers a certain category of clients who were really excluded,' said Rajeev De Mello, who oversees about $10 billion as head of Asian fixed income at Schroder Investment in Singapore. 'When we saw other countries move into that situation it usually had an impact.'
Eoin Treacy's view
Indonesia's local currency 10-year yield is 7.85% which is well above what is of offer from just about every other investment grade government bond. Indonesia hasn't been upgraded just yet but there is potential for some contraction in sovereign spreads if that does in fact go ahead considering the search for yield that continues to characterise the market.
Argentina Offers Tax Amnesty on Missing $500 Billion
This article by Charlie Devereux for Bloomberg may be of interest to subscribers. Here is a section:
The funds will pay a tax of between zero and 15 percent depending on the amount and when they are brought back into the country, the government said in a statement. The government needs to raise 47 billion pesos ($3.4 billion) to pay legal sentences awarded to pensioners, and another 75 billion pesos a year to pay higher pensions in future.
'Today with this law we're sending to Congress we're seeking to repair years of injustice because we've found lots of situations where pensioners have made legal claims, won judgments and yet the state persists in seeking any trick to avoid paying,' Macri said in a televised speech.
Macri will have to overcome people's mistrust of the Argentine authorities for the amnesty to be a success. During the default of 2001, the government restricted bank withdrawals and converted people's dollar savings into pesos during a period in which the local currency collapsed 75 percent. Still, an international tax sharing agreement that begins in 2017 will make it much more difficult for Argentines to continue hiding funds abroad, Finance Minister Alfonso Prat-Gay said.
The tax amnesty 'is the first that rewards those who were up-to-date,' Prat-Gay said Friday. 'We're offering this last opportunity because from January the tax agency will have all the instruments it needs to search for that money in any part of the world.'
Eoin Treacy's view
The Macri administration had to move fast to get as much done as possible before the honeymoon period of his tenure expires. Trying to encourage Argentines to repatriate funds from overseas is no small undertaking but would certainly help to replenish government coffers and stock economic growth.
Fuller Treacy Money