U.S. bond funds attract cash, shaking off inflation fears
U.S.-based taxable bond funds netted cash for the first time in four weeks, Lipper data released on Thursday showed, a sign that savers may be less wary than the Federal Reserve of inflation under the incoming Trump administration. The funds attracted $1.2 billion in the week through Jan. 4, the research service said, even as minutes from the Fed’s December meeting released on Wednesday showed concerns that quicker economic growth under President-elect Donald Trump could require faster-than-expected interest rate hikes to ward off inflation. Bonds sold off after the Nov. 8 U.S. presidential election on fears that the new administration’s plans to stimulate the economy with tax cuts and infrastructure spending could also stoke bond-harming inflation.
Germany posts 6.2 billion euro budget surplus in 2016
Jan 12 Germany’s federal government posted a budget surplus of 6.2 billion euros ($6.60 billion) last year, helped by a strong economy and low borrowing costs, senior government sources said on Thursday, adding they wanted to use the windfall to amortize debt. It is the third consecutive year Europe’s biggest economy has not needed net new borrowing. The 2015 federal surplus was 12.1 billion euros, said the sources. "We want to suggest to the lower house of parliament that this money is used for amortizing debt," said one senior government source. In an election year, the surplus has triggered a debate among Chancellor Angela Merkel’s conservatives and her Social Democrat (SPD) coalition partners over whether the windfall should be used to pay off old debt or raise public investment.
China banks extend record 12.65 trillion yuan in loans in 2016 as debt worries mount
China’s banks extended a record 12.56 trillion yuan (US$1.82 trillion) of loans in 2016 as the government encouraged more credit-fuelled stimulus to meet its economic growth target, despite worries about the risks of an explosive jump in debt. China’s top leaders pledged last month to stem the growth of asset bubbles in 2017 and place greater importance on preventing financial risk, even as some global financial experts warned the nation’s debt load is nearing crisis levels. In December alone, Chinese banks extended 1.04 trillion yuan in net new yuan loans, far more than economists had expected, central bank data showed on Thursday.
Yields on Brazil rate futures tighten after central bank action
Jan 12 Yields on Brazilian interest rate future contracts tightened sharply on Thursday after the central bank cut rates more aggressively than expected to fight a deep recession. After market close on Wednesday, the central bank reduced the benchmark Selic overnight lending rate by 75 basis points to 13.00 percent, its lowest in two years. Most traders expected a 50 basis-point cut.