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Tag: bond market
Trump's Bond Benefactor 'Illegally' Seized Cars Of Service Members

Trump's Bond Benefactor 'Illegally' Seized Cars Of Service Members

Don Hankey, the billionaire who put up Donald Trump's $175 million bond last week for the MAGA hopeful's New York civil fraud trial judgment, was once sued by the former president's Department of Justice, according to an exclusiveDaily Beast report.

Hankey gained much of his $7.4 billion net worth, according to the report, by "targeting low-income customers with high-interest auto loans" through his company, Westlake Services.

MSNBC legal correspondent Lisa Rubin reported earlier this week that the billionaire is also "believed to be the largest shareholder in Axos Bank, which "refinanced Trump’s loans on Trump Tower and Doral in 2022."

Furthermore, because "Axos has loaned Trump $100 million in his refinancing of Trump Tower and another $125 million for Doral" Resort, Rubin noted, the ex-president was already indebted to Hankey prior to last week's $175 million bond.

However, the Beast notes, Hankey's "past is important context for his loan to Trump, and his company’s choppy history with federal law enforcement—as well as the fact that his firm would be regulated under a potential second Trump administration—may cast the loan in a new light."

Westlake Services "had systematically violated the rights of military employees over a period of several years," according to the report, having "repossessed dozens of vehicles belonging to military employees without obtaining the necessary court orders required under the law."

Prosecutors said, "Westlake and Wilshire specifically target servicemembers, including junior enlisted servicemembers, as customers for their subprime and near-subprime loan products," while their "complaint noted that the unlawful repossessions were 'intentional, willful, and taken in disregard' for the members’ rights, citing the fact that Hankey’s firms had followed the proper procedures when it was in their interest—like when it came to approving service member requests for interest rate reductions."

Westlake "settled the suit by paying $700,000 to Westlake immediately settled, agreeing to pay $700,000 in damages to the affected service members, along with a roughly $61,000 fine to the federal government," according to the Beast.

The news outlet also notes, a couple of years prior to the Trump DOJ's lawsuit against Westlake "and its wholly-owned subsidiary Wilshire under the SCRA, those same two entities were nailed by the Consumer Financial Protection Bureau for 'illegal debt collection tactics.'"

Reprinted with permission from Alternet.

Senate Republicans Vote To Shut Government And Crash Economy

Senate Republicans Vote To Shut Government And Crash Economy

A report released by Moody's Analytics on September 21 warns that failure to raise the ceiling on the U.S. national debt and to renew the spending authority of the U.S. Treasury when it expires on September 30 will lead to a default that "would be a catastrophic blow to the nascent economic recovery from the COVID-19 pandemic."

Senate Republicans on Monday night blocked the bill that would fund the government and raise the debt ceiling, bringing the United States to the brink of both a government shutdown and an economic recession.

Not a single Republican voted to advance the funding bill, which had passed the House a week ago and would prevent the government from shutting down at the end of Thursday, when the current funding bill expires.

The country will reach the ceiling on its ability to borrow to pay its debts in early October. If it isn't raised, the country will default, sending it into an economic tailspin that Moody's said would cost 6 million jobs and $15 trillion in household wealth.

The report said that a default would particularly hurt the U.S. bond market, generally considered a relatively safe place to invest for retirement.

Treasury bonds are basically loans to the government made by investors that are paid back by a specified date; a default would mean the loans are not repaid on time. "Americans would pay for this default for generations, as global investors would rightly believe that the federal government's finances have been politicized and that a time may come when they would not be paid what they are owed when owed it. To compensate for this risk, they will demand higher interest rates on the Treasury bonds they purchase. That will exacerbate our daunting long-term fiscal challenges and be a lasting corrosive on the economy, significantly diminishing it."

The report said a potential default would be "cataclysmic":

Stock prices would be cut almost in one-third at the worst of the selloff, wiping out $15 trillion in household wealth. Treasury yields, mortgage rates, and other consumer and corporate borrowing rates spike, at least until the debt limit is resolved and Treasury payments resume. Even then, rates never fall back to where they were previously. Since U.S. Treasury securities no longer would be risk free, future generations of Americans would pay a steep economic price.

Democrats slammed their GOP colleagues, with Rep. Adam Schiff of California calling their refusal to close debate on the legislation and move to a vote on it before the deadline "craven."

"Every single McConnell Republican just voted to blow up the entire economy and start a depression for no reason except because the President is a Democrat," Rep. Bill Pascrell (D-NJ) tweeted.

"Mitch McConnell just 2 years ago: 'America can't default. That would be a disaster.' Now he's flirting with that disaster because he thinks it'll notch him a political win," Sen. Sheldon Whitehouse (D-RI) tweeted.

Senate Minority Leader Mitch McConnell said when Donald Trump was in the White House that not raising the debt ceiling would be catastrophic.

But now that President Joe Biden is in office and Democrats control both chambers of Congress, McConnell is refusing to provide any Republican votes, saying Democrats have to do it on their own with a more complicated procedural maneuver.

"We will support a clean continuing resolution that will prevent a government shutdown," McConnell said Monday. "We will not provide Republican votes for raising the debt limit."

Congress raised the debt ceiling three times on a bipartisan basis when Trump was president and McConnell served as Senate majority leader.

"Note that Democrats never filibustered the debt limit under Bush and actually provided most of the votes for cloture under Trump," Seth Hanlon, a senior fellow at the Center for American Progress, tweeted. "What McConnell is doing now is unprecedented, disgraceful, and dangerous."

Republican members are claiming that they don't want to raise the debt ceiling because Democrats are working to pass Biden's economic plan, which would provide funding for infrastructure such as roads and bridges, paid family leave, child care, and added dental and vision benefits under Medicare.

But the raising the debt ceiling means enabling payments on the debt the United States has already accrued, not on future spending. While Trump was in office, Republicans helped add $7.8 trillion to the national debt, the third biggest increase as a share of the size of the economy under any president in U.S. history, the Washington Postreported.

It's unclear what will happen next, as Republicans bring the economy to the brink.

House Speaker Nancy Pelosi tweeted on Monday night, "The full faith & credit of the United States should not be political. Republicans' reckless decision to block government funding & raising the debt ceiling threatens 6 million jobs, financial ruin for countless families, military paychecks & Social Security payments to seniors."

Published with permission of The American Independent Foundation.

‘Trump Thump’ Whacks Bond Market For $1 Trillion Loss

‘Trump Thump’ Whacks Bond Market For $1 Trillion Loss

NEW YORK (Reuters) – Donald Trump’s stunning victory for the White House may mark the long-awaited end to the more than 30-year-old bull run in bonds, as bets on faster U.S. growth and inflation lead investors to favor stocks over bonds.

A two-day thumping wiped out more than $1 trillion across global bond markets worldwide, the worst rout in nearly 1-1/2 years, on bets that plans under a Trump administration would boost business investments and spending while firing up inflation.

“We’ve had a sentiment shift in the bond market. We’ve seen it, too. People have already started reallocating out of bonds and into stocks,” said Jeffrey Gundlach, chief executive officer of Los Angeles-based DoubleLine Capital, which has more than $106 billion in assets.

“The cracks have been forming for five years – we’re in this slow-grinding higher phase in yields,” he said.

The stampede from bonds propelled longer-dated U.S. yields to their highest levels since January with the 30-year yield posting its biggest weekly increase since January 2009, Reuters data showed.

In the stock market, the blue chip Dow Jones industrial average finished out its best week in five years on Friday as it marked a record high close.

The 10-year German Bund yield rose to its highest level in eight months, while the 10-year British gilt yield climbed to its highest level prior to Britain’s decision to leave the European Union on June 23, known as Brexit.

Bank of America Merrill Lynch’s Global Broad Market Index fell 1.18 percent this week, the steepest percentage drop since June 2015, which is equivalent to more than $1 trillion. Its U.S. Treasury index suffered a 1.91 percent decline on a total return basis, the biggest weekly drop since June 2009.

Many investors, who have loaded up on bonds on the belief of protracted easy monetary polices worldwide due to sluggish global economy, are not ready to throw in the towel.

They are counting on insurers and pension plans, together with European and Japanese investors who are struggling with negative yields at home, to preserve the bull run for bonds.

“Are we going to see a dramatic backup in yields? It’s too soon to make a conclusion about that,” said Mihir Worah, chief investment officer in asset allocation and real assets at PIMCO in Newport Beach, California, which manages $1.55 trillion in assets.

Goldman Sachs and BAML forecast the 10-year U.S. yield could climb to 2.50 percent, compared with 2.11 percent at Thursday’s close. The U.S. bond market was closed on Friday for Veterans Day.

BREXIT TWO?

Fund managers at top bond firms and analysts on Wall Street are weighing whether the impact of Trump’s win on financial markets will be similar to Brexit. European stocks sold off violently after the Brexit vote, but by mid-August had recovered all the losses. Even so, there is a great deal of uneasiness as investors wait for details on how Britain will exit the EU – not unlike the waiting game on what Trump will actually do as president.

“We need more of a cushion given the uncertainties. That’s exactly what is being played out in the global debt market,” said Mark Lindbloom, portfolio manager at Western Asset Management in Pasadena, California, which oversees $445 billion.

Trump, who beat Democratic rival Hillary Clinton, campaigned on tax cuts, trade restrictions and fiscal spending on infrastructure. It remains unclear how these promises translate into policy and the degree to which they would affect the economy.

Since Election Day, the U.S. bond market’s gauge on investors’ 10-year inflation outlook jumped to its highest level since July 2015.

Bond and stock markets suggest whatever Trump may do with the help of a Republican-controlled Congress would give a lift to the U.S. economy, which is growing at about 2 percent this year.

“It is a bit early to be calling the Big Rotation,” said Art Hogan, chief market strategist at Wunderlich Securities in New York, referring to the idea that the three-decade-old rally in bonds is ending.

“We’ve been declaring that rotation for years. … I’m afraid it’s hard to think about that happening in the current demographics we have. Baby boomers have more investable assets than millennials do.”

Betting the U.S. economy may fare better on possible tax cuts and more federal spending, investors scooped up financial and biotech stocks, driving the S&P 500 to its best week since 2014 on Friday.

For a rotation into equities from bonds to materialize, it would require “a pick-up in the global economy, and for central banks globally at the very least to halt accommodation -and in our case remove some,” Hogan said.

TIPS APPEAL

While investors dumped most types of bonds after Trump’s victory, they piled into Treasury inflation-protected securities as a hedge against a pick-up in inflation.

“You are seeing interest in TIPS right now from a widening investors base,” said Brian Smith, portfolio manager at TCW in Los Angeles, which has $197 billion in assets.

Investors poured $1 billion into TIPS in the week ended Nov. 9, the second-biggest inflows since records began in October 2002, data from Thomson Reuters’ Lipper service showed on Thursday.

Trump’s win dovetailed with a rise in U.S. yields, reversing the safe-haven trade that stemmed from fears over the fallout of Britain’s vote to leave the EU.

Yields have also risen as some Federal Reserve officials reasserted calls for a rate increase by year-end, a move that is increasingly seen as likely by the market.

Inflation concerns have also been stoked by a recovery in U.S. oil prices, which tumbled to a 12-year low in February due to concerns over a supply glut. That is seen as another factor behind the rise in bond yields.

“The trend was already in play and it has accelerated,” Pimco’s Worah said, adding there is more room for yields to rise but not much further from current levels.

(Additional reporting by Sam Forgione and Rodrigo Campo in New York, Jamie McGeever in London; Editing by Daniel Bases)

IMAGE: Morning commuters pass by the New York Stock Exchange (NYSE) in New York City, U.S., November 10, 2016.  REUTERS/Brendan McDermid

Bond Markets Brace for Panic As Congress Bickers Over Debt Ceiling

Hold on for just a New York minute now and consider the powerfully serious message the bond market sent last week about the political dithering in Washington and in Europe’s capitals. “Pay attention folks,” as the investor Gifford Combs e-mailed me on Friday. “This is not a drill.”

Here are the facts: The yield on Greek sovereign debt is now at record highs for the euro era. Last week’s state-managed bond auction in Italy almost failed. And, while few seem to have noticed, the overnight repurchase market — for short-term, secured, corporate debt obligations — nearly seized up amid what Combs described as “an almost panicky scramble” for less- risky paper.

Indeed, investors’ manic desire for safety last week reached levels not seen since the most acute days of the financial crisis in September and October 2008. Ironically, though, given the pathetic display in Washington and the country’s ongoing fiscal troubles, people turned in droves to the perceived security of the U.S. Treasury market, even though it has never looked shakier.

Remember the days of negative yields on short-term U.S. paper — when effectively investors paid the government to keep their money safe? Warren Buffett considered that happenstance so rare that two years ago at the Berkshire Hathaway Inc. annual meeting he flashed a slide of a Treasury sale transaction ticket to his legion of followers.

Negative Yields Return

Well, it seems those days are back. U.S. Treasury bills shorter than three months in duration traded at negative yields last week. Three-month bills were trading a yield of 1 basis point. Six-month bills traded to yield 4 basis points and one- year U.S. Treasuries were trading to yield 13 basis points.

In short, demand for the perceived security of the debt obligations of the U.S. government was so intense that “it was virtually impossible to find ANY amount of certain maturities of short duration Treasury bills,” Combs informed me. He ended up buying what he could of the one-year notes and paying big time for the privilege (resulting in that minuscule 13 basis-point yield).

Not everyone, however, seems to have so much faith in the U.S. The Saudis appear to be so concerned that Congress and President Barack Obama will not be able to reach a resolution on increasing the debt-ceiling by Aug. 2 — pushing the Treasury to possible default on the nation’s obligations for the first time — that, according to market insiders, last week they Hoovered up euros as a possible hedge. This helps to explain why the European currency has managed to more than hold its own against the dollar despite the continent’s economic woes.

Money-Market Worries

At the same time, it’s an open secret on Wall Street that the Federal Reserve Bank of New York has become increasingly concerned about the state of U.S. money-market funds. With as little fanfare as possible — understandably, so as not to cause a panic — the New York Fed has been urging domestic money- market funds to reduce their exposure to European banks, where the funds have turned to increase yields not available in the U.S. because of rock-bottom interest rates.

The Fed is said to be terribly worried that — because of provisions in the Dodd-Frank law — it will no longer be able to rescue a money-market fund if it “breaks the buck,” as the Fed did famously the day after Lehman Brothers Holdings Inc. filed for bankruptcy.

Threat of Downgrades

As if all this were not enough, last week both Moody’s and Standard & Poor’s put the U.S. itself on credit watch, with negative implications about a possible downgrade. S&P said that while it expected an agreement regarding the debt ceiling, it was worried that the country’s fiscal house will remain in disarray.

“Despite months of negotiations, the two sides remain at odds on fundamental fiscal policy issues,” it stated in its Bastille Day note. “Consequently, we believe there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.”

Additionally, on Friday, S&P put the six AAA-rated insurers — including New York Life Insurance Co. and Northwestern Mutual Life Insurance Co. — on the watch list for a possible downgrade because of their significant holdings of U.S. Treasury and agency securities. None of this is even remotely good news.

Charade in Washington

What is the bond market telling us? Combs, a founder of Dalton Investments LLC in Los Angeles, likens the panic in the bond market to the unambiguous message the stock market sent on Sept. 29, 2008 — when the Dow Jones Industrial Average dropped 780 points, the largest one-day point drop ever — after Congress voted down the first version of the TARP bill. That’s how concerned the bond market is now about the charade going on in Washington.

Combs worries, though, because of how inherently more difficult it is for people to understand the machinations of the bond market than those of the stock market, that the message this time is not getting through to the politicians in Washington, who seem intent on taking a nonchalant approach to the potential Aug. 2 deadline for raising the debt ceiling. (Some politicians — hello, Michele Bachmann — have actually claimed that defaulting on our obligations would be good for the country.)

Politicians Don’t Understand

His concern is that politicians don’t understand how intimately tied transactions are on a worldwide basis to U.S. Treasury securities, and that if Treasuries were no longer accepted as collateral, the resulting market turmoil would make the “collapse of Lehman Brothers look like a walk in the park.”

Combs said he believes a default on U.S. Treasuries would set off “an unholy scramble” for what constitutes “good and valid” collateral, creating a huge problem in the worldwide payments system: “It’s a situation no one has ever faced before — that people stop accepting Treasury bills as collateral.”

Even though, incredibly, the politicians in Washington took the weekend off from their negotiations, a bunch of them still found the time to appear on the Sunday morning political talk shows to make the case that a compromise will be found before Aug. 2. We’ll see if they are correct — but bond traders are going to be increasingly less likely to bet on it.

William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. The opinions expressed are his own.

Copyright 2011 Bloomberg.