Vodafone Idea’s Debt to Equity – Latest news headlines


The Government of India is set to become the largest shareholder of Vodafone Idea with 35.8 percent stake as the company’s board has approved conversion of interest on deferred spectrum and Adjusted Gross Revenue (AGR) dues into equity, Vodafone Idea said on Tuesday.

The debt-laden Vodafone Idea, a joint venture of UK-based Vodafone Group and Kumar Mangalam Birla-led Aditya Birla Group, has opted for conversion of interest on deferred spectrum and Adjusted Gross Revenue (AGR) liabilities into equity.

The conversion will result in dilution to all the existing shareholders of the Company, including the Promoters.

Following conversion, it is expected that the Government will hold around 35.8 percent of the total outstanding shares of the Company, and that the Promoter shareholders would hold around 28.5 percent (Vodafone Group) and around 17.8 percent (Aditya Birla Group), respectively, Vodafone Idea said in a statement.

The share price of Vodafone Idea slumped following the announcement. Trading in Vodafone Idea started sharply down at Rs. 13.40 at the Bombay Stock Exchange (BSE) on Tuesday against the previous day’s close at Rs. 14.85. The company’s share price plummeted to a low of Rs. 12.05 in the morning trade, which is 18.85 percent lower from its previous day’s close.

The company’s share price recovered later in the day. At 11.10am at the Bombay Stock Exchange (BSE) Vodafone Idea share was trading at Rs. 13.

The Board of Directors of Vodafone Idea, at its meeting held on 10th January 2022, approved the conversion of the full amount of such interest related to spectrum auction instalments and AGR Dues into equity.

“The Net Present Value (NPV) of this interest is expected to be about Rs. 16,000 crore as per the Company’s best estimates, subject to confirmation by the DoT. Since the average price of the Company’s shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the Government at par value of Rs. 10 per share, subject to final confirmation by the DoT,” Vodafone Idea said in a regulatory filing to the stock exchanges.

Union cabinet on September 15 approved a slew of measures to support the cash-strapped telecom firms. The relief measures include a four-year moratorium on payment of spectrum and AGR dues. The telecom firms have also been given the option to pay the interest amount arising due to the deferment of payments by way of issuing equity to the government.

Following the government’s announcement Bharti Airtel and Vodafone Idea opted for the four-year moratorium.

However, Bharti Airtel recently decided to pay the interest amount to the government instead of issuing the equity.

After the conversion of the dues into equity, the Government of India will become the largest shareholder of Vodafone Idea. This will require changes in the company’s Articles of Association.

“The governance and other rights of the Promoter shareholders are governed by a Shareholders Agreement (SHA) to which the Company is a party and are also incorporated in the Articles of Association of the Company,” Vodafone Idea said.

The rights are subject to a minimum Qualifying Threshold of 21 percent for each Promoter group, and in light of the conversion of interest into equity, the Promoters have mutually agreed to amend the existing SHA for reducing the minimum Qualifying Threshold from 21 percent to 13 percent for the purpose of exercising certain governing rights e.g. appointment of directors and relating to appointment of certain key officials, etc.

Vodafone Idea said its Board has also taken note of the proposed changes to the existing Shareholders Agreement (SHA), and accordingly authorised execution of the same and also recommended changes in the Articles of Association (AoA) to give effect to the changes in the SHA.

The amendment to the AoA shall be subject to the approval of shareholders in general meeting, for which the Board has authorised officials of the Company to decide the date of shareholders meeting in accordance with the terms of the amendment to the existing SHA as approved by the Board, the company said.


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China Evergrande Says Construction Has | Stock Market News Today


Troubled property developer

China Evergrande Group


EGRNF -10.55%

said construction work has resumed at more than 90% of its stalled residential projects, adding that it has picked up the pace of delivering apartments promised to home buyers across the country.

Evergrande,


EGRNF -10.55%

in a statement Sunday night, said more than 80% of its suppliers of materials and decorative services have “resumed cooperation,” and that it has signed thousands of new contracts with various suppliers. At the end of August, the developer disclosed that construction had been suspended at some projects after it fell behind on payments. And by October, hundreds of Evergrande’s unfinished developments were affected by work stoppages.

With just a few days to go before the end of 2021, Evergrande said it intends to deliver 39,000 homes in 115 projects to buyers across China in December. It compared that to its completion of fewer than 10,000 units in each of the preceding three months.

The world’s most indebted real-estate firm Evergrande has embarked on a social media campaign to show construction has resumed and says it’s doing whatever it takes to deliver homes. WSJ compares these posts with ones from upset buyers. Photo Composite: Emily Siu

In a post on social media Monday, Evergrande said apartment projects have been handed over in batches in 18 provinces and it released photos of completed buildings adorned with bright red decorations and people signing papers to take ownership of their homes.

Despite this, Evergrande still has many more commitments to fulfill and its debt crisis remains unresolved. The 25-year-old developer used to be one of the country’s largest by contracted sales and is on the hook to deliver units to more than one million people. Many buyers made large down payments on unfinished flats, expecting to take ownership of them in a few years.

Hui Ka Yan,

Evergrande’s founder and chairman, said that “under the care and guidance of governments at all levels,” as well as support from partners, financial institutions and other constituents, the developer has made progress in its commitments to homeowners.

He added that Evergrande would do whatever it takes to resume work and deliver homes and predicted that the firm will eventually be able to “resume sales, resume operations, and pay off debts.”

Hui Ka Yan, China Evergrande’s chairman, in Hong Kong in 2019.



Photo:

Paul Yeung/Bloomberg News

The company’s statement followed comments over the weekend from two Chinese regulators which said they would safeguard the rights of homeowners and keep the property sector stable. Beijing has been trying to prevent Evergrande’s debt crisis from hurting the many small businesses and ordinary citizens that the developer owes money and apartments to.

Wang Menghui,

head of China’s Ministry of Housing and Urban-Rural Development, said in an interview with the state-run Xinhua News Agency that the regulator will address the risks of some leading developers that fail to deliver projects on time, with the goal of “guaranteeing home deliveries, protecting people’s livelihoods and maintaining social stability.”

The People’s Bank of China separately said—as part of a wide-ranging statement on the economy—that it would protect the rights and interests of homeowners and promote the healthy development of the country’s real-estate market.

Evergrande, the world’s most indebted developer, has been struggling under the weight of roughly $300 billion in liabilities, including around $20 billion in international bonds. The developer has missed payment deadlines on some of its dollar bonds, setting the stage for a massive and complex restructuring. Major credit raters have declared it to be in default.

Earlier this month, the conglomerate sought help from the government of its home province, Guangdong. It has since set up a risk-management committee that includes representatives from several state-backed entities.

Evergrande recently said the committee is working to help contain its risks and will engage with its creditors. Some international bondholders, however, have said there has been little communication from the company so far, the Journal reported last week.

The company’s Hong Kong-listed shares have plunged in value this year to historic lows and its dollar bonds are trading at deeply distressed levels. Markets in Hong Kong were closed Monday for a public holiday.

Write to Anniek Bao at [email protected]

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U.S. Stock Futures Tick Higher | Sidnaz Blog


U.S. stock futures ticked up, suggesting Wall Street could stage a partial recovery after worries about the Delta variant of the coronavirus dragged major indexes lower.

S&P 500 futures gained 0.6% and Dow Jones Industrial Average futures strengthened 0.8%. Changes in equity futures don’t necessarily predict market moves after the opening bell.

European stocks climbed Tuesday after a four-session losing streak. The Stoxx Europe 600 added 1% in morning trade, led by gains in energy and utilities sectors.

BP jumped 2.1% snapping a losing streak of more than a week and SSE rose 2%.

The U.K.’s FTSE 100, which is dominated by large international businesses, climbed 1.1%. Other stock indexes in Europe also mostly climbed as France’s CAC 40 gained 1.2%, the U.K.’s FTSE 250 rose 0.7% and Germany’s DAX added 1%.

The euro and the British pound dropped 0.2% against the U.S. dollar whereas the Swiss franc was flat against the U.S. dollar, with 1 franc buying $1.09.

In commodities, international benchmark Brent crude was up 1.2% to $69.43 a barrel. Gold also gained 0.4% to $1,816.60 a troy ounce.

The German 10-year bund yield declined to minus 0.396% and the yield on 10-year U.K. government debt known as gilts was down to 0.553%. The yield on 10-year U.S. Treasury rose to 1.214% from 1.181%. Yields move in the opposite direction from prices.

Indexes in Asia mostly fell as Hong Kong’s Hang Seng lost 1.2%, Japan’s Nikkei 225 index was down 1%, and China’s benchmark Shanghai Composite shed 0.1% after falling by as much as 0.8% during the session.

A trader worked on the floor of the New York Stock Exchange on Monday.



Photo:

Richard Drew/Associated Press

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How Jitters About the Global Economy Are Rippling Through Markets | Sidnaz Blog


Stocks, bond yields and oil prices declined Monday in the most acute sign yet that investors are second-guessing the strength of the global economic recovery that sent markets soaring this year.

Markets rallied in the first half of 2021, thanks to investors’ bets that economies would bounce back, as countries rolled out Covid-19 vaccinations and lifted restrictions on businesses. Reports on everything from retail sales and housing prices to employment have shown swaths of the U.S. economy healing, helping send the S&P 500 to 39 record closes this year and almost double from its March 2020 trough.

Monday’s pullback put a dent in that narrative. The Dow Jones Industrial Average fell 725.81 points, or 2.1%, to 33962.04, logging its steepest decline since October. Meanwhile, the yield on the 10-year U.S. Treasury note, which falls as bond prices rise, sank to its lowest level since February. And U.S. crude oil prices slid 7.5%—marking their worst session since September.

Behind the rout, investors say, is a growing list of concerns about the recovery. The Delta coronavirus variant has spread rapidly, reigniting the debate in several countries about whether governments should resume lockdowns and curb activity. Meanwhile, inflation has accelerated faster than many anticipated, and strained U.S.-China relations have put pressure on trillions of dollars’ worth of U.S.-listed Chinese companies.

Many money managers believe the global economy will be able to keep growing. They just don’t know how quickly—and whether the gains will be enough to keep increasingly pricey-looking markets rising after a banner first half.

“The market is saying the economy is going to slow down fairly significantly in the next weeks or months,” said Zhiwei Ren, a portfolio manager at Penn Mutual Asset Management.

Peak Growth?

Investors say much of what drove markets’ reversals on Monday is concern that the best of the economic recovery may be in the rearview mirror.

The 2020 recession in the U.S. lasted just two months—the shortest on record, according to the National Bureau of Economic Research. The economy powered higher in the year that followed.

Gross domestic product grew at a 6.4% seasonally adjusted annual rate in January through March, leaving the U.S. within 1% of its peak reached in late 2019.

Economists surveyed by the Journal estimate that the economy expanded at a 9.1% seasonally adjusted annual rate in the April-to-June period, the second-fastest pace since 1983. Corporate earnings are also poised to soar. Analysts are projecting profits for S&P 500 companies to rise almost 70% in the second quarter from a year earlier, a growth rate that would be the highest in more than a decade.

Now, some investors are asking: Is this as good as it gets?

Economists believe the pace of U.S. growth this year likely peaked in the spring and will moderate to 6.9% for 2021 as a whole before cooling to 3.2% next year and 2.3% in 2023. These dwindling expectations have stoked big moves among stocks and sectors within the S&P 500 as well as across the bond market.

“That’s what the market has been doing…starting to digest peak growth rates and realizing these growth rates are unsustainable,” said

John Porter,

chief investment officer of equities at Mellon Investments Corp.

Elsewhere around the world, growth also looks poised to slow—potentially pointing to further challenges for investors. The S&P 500 has continued to outperform the Stoxx Europe 600 and Shanghai Composite for the year. However, some investors wonder if the gap between U.S. and overseas indexes will narrow, if the recovery in the U.S. begins to stall more.

Oil Prices Tumble

One area of the markets where fear about growth quickly reared its head: the oil market.

For months, investors had piled into bullish bets on oil, assuming that demand would boom and the economy would stage a robust recovery. Many of those wagers have been unwound in recent sessions. Monday’s declines were driven by fears about the Delta variant halting travel and crimping demand for fuel.

Shares of energy producers, which tend to be sensitive to changes in the economic outlook, also pulled back. The S&P 500’s energy sector is now down 13% this month, the worst-performing group within the index.

Investors say much of what drove markets’ reversals on Monday is concern that the best of the economic recovery may be in the rearview mirror.



Photo:

Richard Drew/Associated Press

Sentiment Stalls

For months, people around the U.S. opened their wallets and spent on everything from cars to travel. Investors grew more optimistic about the economy, as Americans got vaccinated, businesses reopened and many people found themselves flush with cash, helped in part by stimulus checks. One survey by Gallup showed that the percentage of Americans who considered themselves to be “thriving” in life reached 59.2% in June, the highest in more than 13 years.

Recently, signs have emerged that this optimism is starting to fade. Fresh data last week showed that consumers stepped up spending in June. However, new figures also showed that consumer sentiment in the U.S. declined in early July, missing expectations from economists polled by The Wall Street Journal. Meanwhile, the unemployment rate has stagnated, and some investors are now concerned about a labor shortage snarling the economy.

One of the biggest factors weighing on sentiment? Inflation. Consumer complaints about rising prices on homes, vehicles and household durables reached a record, particularly hitting lower and middle-income households. The Labor Department said its consumer-price index rose 5.4% in June from a year ago, the fastest 12-month pace since August 2008.

Because consumer spending drives much of U.S. economic growth, investors tend to heed signs that households are beginning to become more wary about major purchases. Inflation can also eat into corporate profits, making stocks look less attractive.

According to a recent Charles Schwab survey, 15% of all U.S. stock market investors said they first began investing in 2020. Picking a stock, however, may not be as easy as it sounds. WSJ’s Aaron Back explains the factors at work when stock-picking. Photo illustration: Rafael Garcia

“Last week we had high inflation readings. Now we have concerns that the rise in Covid cases is dimming the economic outlook. High inflation and lower economic growth is not a good combination,” said

Dave Donabedian,

chief investment officer of CIBC Private Wealth Management, U.S., in emailed comments.

The Bond Market’s Warning

Even before Monday, bets that economic growth will cool rippled across the bond market. Investors have been gobbling up government bonds for weeks.

One effect of the slide in bond yields? The real yield on the 10-year Treasury note has been negative, and on Monday it slipped to 1.05%, the lowest since February. Real yields are what investors get on U.S. government bonds after adjusting for inflation. When those bond yields are negative, as they have been lately, investors are effectively locking in losses when parking their money in government bonds.

“People are worried about inflation but also a growth scare,” said

Giorgio Caputo,

a portfolio manager at J O Hambro Capital Management. “You’ve never had a modern economy that’s reopened after a pandemic.”

These fears have driven investors into government bonds and helped push those real yields lower and lower, he said.

While a souring outlook for growth is generally negative for stocks as a whole, one area of the market has actually benefited from negative real yields. Lower yields weigh on the discount rate in formulas used to estimate what stock prices should be, making future corporate earnings more valuable. The recent drop in yields has boosted shares of technology companies and other fast-growing firms and helped drive a mammoth shift in the stock market in recent weeks. Tech behemoths like

Apple Inc.,

Amazon.com Inc.

and

Microsoft Corp.

have risen to fresh highs, even as many other parts of the market have floundered.

And on Monday, the tech-heavy Nasdaq Composite outperformed its peers. Many investors returned to the bets that had flourished when people around the country were stuck at home during the Covid-19 pandemic.

Peloton Interactive Inc.

shares jumped 7.1%, while

Slack Technologies Inc.

added 1%.

Wayfair Inc.

shares advanced 3.3%.

In contrast, shares of cyclical companies that benefit from a speedier economic recovery—like banks, energy companies and airlines—were among the worst-performers in the stock market.

“It seems like the market overextrapolated the good times…and now we’re seeing a little bit of the air being let out,” said

Jason Pride,

chief investment officer of private wealth at Glenmede.

Covid-19 Weighs on Investors

More WSJ coverage of markets, selected by the editors

Write to Gunjan Banerji at [email protected] and Akane Otani at [email protected]

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Latest News Today – OYO Raises $660 Million In Debt Funding From


Oyo is among the first Indian startups to raise capital through term loan funding route

Hospitality company Oyo Hotels and Homes raised debt funding of $660 million from global institutional investors through the term loan funding (TLB) route, according to a statement released by the firm. The Gurugram-based unicorn will utilise the funds to repay its past debts, strengthen its balance sheet, and other business purposes including investment in product technology, in a bid to revive its COVID-hit business. 

The term loan funding route refers to a tranche of senior secured syndicated credit facility from global institutional investors. With the current round of funding, Oyo is among the first Indian startups to raise capital through the term loan funding route.

The offer or the proposed issuance was oversubscribed by 1.7 times and the company received commitments of close to $1 billion from the leading global institutional investors. Oyo said in its statement that the deal was upsized and increased by 10 per cent to $660 million driven by strong interest from marquee investors.

“…delighted by the response to OYO’s maiden TLB capital raise that was oversubscribed by leading global institutional investors. We are thankful for the trust that they have placed in OYO’s mission of creating value for owners and operators of hotels and homes across the globe,” said Abhishek Gupta, Group Chief Financial Officer, OYO.

”…Our two largest markets have demonstrated profitability at the slightest signs of industry recovery from the COVID-19 pandemic,” he added.

“As a part of OYO’s board, it’s heartening for me to see the strong interest from the investor community in the company, leading OYO to become the first Indian startup to be independently assessed by the world’s leading credit rating agencies – Moody’s and Fitch,” said Dr. W. Steve Albrecht, a member of OYO’s Board of Directors and Chairman of the Audit Committee.

Founded in 2013 by Ritesh Agarwal, Oyo is now a leading multinational chain of leased and franchised hotels, homestays, and living spaces. Initially, Oyo consisted of only budget hotels but gradually, the startup expanded globally with vacation homes, hotels, and rooms across various countries.



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Don’t Believe the Inflated Yields on Inflation-Protected Bond | Sidnaz Blog


Mutual funds and exchange-traded funds that buy TIPS, or Treasury inflation-protected securities, are boasting yields of 8% or more in a bond market where even 4% looks outlandish. Such funds took in an estimated $36.3 billion in new money in the first half of 2021, according to Morningstar—a record for any six-month period since TIPS funds were born in the late 1990s.

If an 8% yield tempts you to join them, listen up. These funds that purport to fight inflation are, ironically, inflating their own reported yields.

I’ve written about this problem before, but it’s never been worse. This week, every single inflation-protected security was trading at a negative yield to maturity before inflation. Yet more than two dozen mutual funds and ETFs that own these bonds are reporting yields of 6%, 7%, even 8% or more.

These Yields Are TIPSy

The reported yields on mutual funds and exchange-traded funds investing in inflation-protected government bonds vary wildly, depending on how they calculate their income.

 

 

$36.99

 

28.85

 

18.43

 

12.38

 

9.67

 

2.62

 

1.48

 

0.58

Fund

Vanguard Inflation-Protected Securities (Admiral)

iShares TIPS Bond ETF

 

Schwab US TIPS ETF

 

PIMCO Real Return Institutional

Fidelity Inflation-Protected Bond Index

SPDR Portfolio TIPS ETF

 

FlexShares iBoxx 3-Year Target Duration TIPS ETF

Invesco Short Duration Inflation Protected (R5)

Fund, Net assets (billions)

Vanguard Inflation-Protected Securities (Admiral), $36.99

iShares TIPS Bond ETF, $28.85

 

Schwab US TIPS ETF, $18.43

 

PIMCO Real Return Institutional, $12.38

Fidelity Inflation-Protected Bond Index, $9.67

SPDR Portfolio TIPS ETF, $2.62

 

FlexShares iBoxx 3-Year Target Duration TIPS ETF, $1.48

Invesco Short Duration Inflation Protected (R5), $0.58

Fund, Net assets (billions)

Vanguard Inflation-Protected Securities (Admiral), $36.99

iShares TIPS Bond ETF, $28.85

 

Schwab US TIPS ETF, $18.43

 

PIMCO Real Return Institutional, $12.38

Fidelity Inflation-Protected Bond Index, $9.67

SPDR Portfolio TIPS ETF, $2.62

 

FlexShares iBoxx 3-Year Target Duration TIPS ETF, $1.48

Invesco Short Duration Inflation Protected (R5), $0.58

How the heck can that be? Are investors expecting double-digit rises in the cost of living? Or are fund companies exploiting a regulatory loophole for marketing purposes?

TIPS are notes and bonds, issued by the U.S. Treasury, whose value varies with changes in the monthly Consumer Price Index. When that measure of inflation rises, the principal value of each of these securities goes up; so does its interest payment. When inflation declines, the TIPS’ value and interest fall with it.

TIPS pay interest, albeit not much these days—a 5-year note sold in April has a coupon of 0.125%. A big chunk of the return instead comes from the inflation adjustment to the principal.

On websites and in other marketing, funds display what’s commonly known as SEC yield. That number is sky-high right now.

Under rules from the Securities and Exchange Commission, funds take “dividends and interest” earned per share during the prior 30 days, deduct expenses and annualize it. The resulting SEC yield tends to be roughly what you’d get if you multiplied the previous month’s net income by 10 or 12.

The SEC’s rules for calculating its yield, however, don’t say whether to include the inflation adjustment or leave it out.

And that gives fund companies a lot of leeway.

As the economy roared back, the Consumer Price Index came in at unusually high levels of 0.8% in May and 0.9% in June. Those are monthly numbers, so funds that annualize them and include the inflation adjustment to principal in their income have been reporting monster SEC yields. To believe in that yield is to imagine that such fluky numbers are sustainable.

Among the many examples this week were the $9.7 billion Fidelity Inflation-Protected Bond Index Fund (SEC yield: 7.11%), the $12.4 billion Pimco Real Return Institutional Fund (8.2%) and the $29.2 billion

iShares TIPS Bond ETF

(8.4%).

More from The Intelligent Investor

“To help our clients make fully informed investment decisions,” says a Fidelity spokesman, “we [also] disclose the distribution yield for our bond funds, which is a better reflection of the shareholder experience.”

Distribution yield measures a fund’s income payouts, which also can include cost-of-living adjustments to principal.

Steve Rodosky, co-portfolio manager of Pimco’s inflation-protected bond funds, says the firm calculates and displays the yield “in accordance with the SEC rules.” Pimco’s disclosures also present distribution yield and estimated yield to maturity. As of July 14, for instance, at Pimco’s 1-5 Year U.S. TIPS Index ETF, the SEC yield was 8.79%; distribution yield, 6.89%; and the yield to maturity, 0.55%.

The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ’s Jon Hilsenrath looks at what consumers can expect next.

“From a market-expectation perspective, the estimated yield to maturity is a more stable indicator” than SEC yield, says Daniel He, another co-manager of Pimco’s TIPS funds.

In addition to SEC yield, says Karen Schenone, a fixed-income strategist for iShares, “investors should also look at yield to maturity and real yield” (or TIPS income adjusted for the inflation rate). Those measures are also displayed on iShares’ website and in other marketing materials.

Earlier this year, iShares added a pop-up disclaimer to its website: “An exceptionally high 30-day SEC yield may be attributable to a rise in the inflation rate, which might not be repeated.”

SHARE YOUR THOUGHTS

How are you hedging against inflation in your portfolio? Join the conversation below.

At least $109 billion is invested in TIPS funds with SEC yields of 6% or more, according to Morningstar—roughly half the category’s total assets.

Not all have chosen to report inflated yields, though.

State Street Global Advisors is reporting negative SEC yields on several funds, including SPDR Bloomberg Barclays 1-10 Year TIPS ETF and SPDR Portfolio TIPS ETF. Vanguard Group also shows negative reported SEC yields on its TIPS funds.

“In my view, including the inflationary adjustment to the principal [in] the SEC yield is incredibly misleading,” says

Matthew Bartolini,

head of ETF research at State Street Global Advisors. “It assumes that, on a go-forward basis, the inflation reading in the prior months will be persistent” even though the Consumer Price Index can vary wildly from month-to-month. “And many are unaware of this.”

Right now, “the market is experiencing very high month-over-month inflation, and a calculation that annualizes inflation accretion may reflect an overstated view of expected yield,” says a Vanguard spokesman. “Our practice has been to avoid that adjustment, which results in SEC yields on Vanguard funds with TIPS exposure appearing lower than other firms. Conversely, during periods where monthly inflation is negative, our SEC yield may look higher.” The firm feels this approach represents its TIPS funds’ real yield consistently and accurately, he says.

In short, you can’t earn 8% income in a 2% bond market. And funds that claim to be protecting against inflation should protect their investors against inflated expectations, too.

Write to Jason Zweig at [email protected]

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U.S. Stock Futures Edge Down With Bank Earnings on Tap | Sidnaz Blog


U.S. stock futures ticked lower ahead of the first major earnings reports of the season, with results due from

Goldman Sachs

and

JPMorgan Chase

before the opening bell.

S&P 500 futures slipped 0.1% and futures tied to the Dow Jones Industrial Average fell 0.1%. Changes in equity futures don’t necessarily predict movements after the opening bell.

In Europe, the Stoxx Europe 600 was lower 0.2% in morning trade as gains in financials and consumer staples sectors were offset by losses in utilities and consumer discretionary sectors.

The U.K.’s FTSE 100 added 0.2%. Other stock indexes in Europe were mixed as the U.K.’s FTSE 250 also gained 0.2%, whereas France’s CAC 40 was down 0.2% and Germany’s DAX shed 0.2%.

The Swiss franc, the euro and the British pound were down 0.1%, 0.1% and 0.2% respectively against the U.S. dollar.

In commodities, international benchmark Brent crude rose 0.3% to $75.39 a barrel. Gold also gained 0.3% to $1,811.40 a troy ounce.

German 10-year bund yields declined to minus 0.297% and the yield on 10-year gilts fell to 0.646%. 10-year U.S. Treasury yields edged up to 1.367% from 1.362%. Bond yields and prices move inversely.

In Asia, indexes mostly climbed as Hong Kong’s Hang Seng rose 1.8%, Japan’s Nikkei 225 index climbed 0.5%, and China’s benchmark Shanghai Composite gained 0.5%.

A trader worked on the floor of the New York Stock Exchange on Monday.



Photo:

Richard Drew/Associated Press

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Latest News Today – Increase In Household Debt Stress Is Worrying, Says SBI


Second Coronavirus wave in India has led to a rise in household debt stress

The beginning of second Covid-19 wave has resulted in significant deposit outflows from banking system in alternated fortnights, the pace of which has now again moderated, according to a report from State Bank of India’s (SBI) economic research department.

It said one of the worrying features is rising household debt stress. Household debt – after taking into account retail loans, crop loans and business loans from financial institutions like commercial banks, credit societies and non banking finance companies (NBFCs) – has sharply increased to 37.3 per cent of GDP in 2020-21 from 32.5 per cent of GDP in 2019-20.

“The decline in bank deposits in FY21 and concomitant increase in health expenditure may result in further increase in household debt to GDP in FY22,” said the report.

India’s household debt to GDP ratio is still lower than other countries, though there is need to supplement wage income as a percentage of GDP that has been declining.

However, the report noted that various indicators showed improvement in economic activity in June. SBI business activity index shows significant improvement in activity since May-end with the latest reading for the week ended June 28.

Significantly, the report further mentioned that global experience shows that countries with high per capita GDP have been associated with higher Covid-19 deaths per million, while low per capita countries are associated with low Covid-19 deaths, showing that high income countries suffered more during the pandemic

Indian experience shows that states with high per capita GDP have been associated with higher Covid-19 deaths per million while low per capita GDP are associated with low Covid-19 deaths.

Bihar, Jharkhand, Uttar Pradesh, Assam, Odisha and Rajasthan all have low per capita income and low deaths per million. At the same time, Maharashtra, Uttarakhand, Kerala, Karnataka, Tamil Nadu and Himachal Pradesh have high per capita income and high deaths per million.

The SBI report said that certain states like Rajasthan, Delhi, Himachal Pradesh, Kerala and Uttarakhand have already given double dosage of vaccine to larger percentage of population above 60 years. Total vaccine doses as percentage of population above 60 years is more than 100 per cent for these states, implying double dose to many.

Overall vaccination in rural areas remains low. Certain states like Gujarat, Karnataka, Kerala, Andhra Pradesh, Uttarakhand and Rajasthan have vaccinated greater proportion of rural population than compared to others.



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U.S. Stock Futures Edge Up to Start the Week | Sidnaz Blog


U.S. stock futures inched higher ahead of Monday’s opening bell, suggesting the S&P 500 could reach another record.

S&P 500 futures were up 0.1% and futures on the Dow Jones Industrial Average strengthened 0.1%. The contracts don’t necessarily predict moves after the markets open.

In Europe, the Stoxx Europe 600 traded mostly flat in morning trade as gains in healthcare and consumer staples sectors were balanced by losses in materials and energy sectors.

Ipsen slipped 2.2%.

The U.K.’s FTSE 100 was down 0.2%. Other stock indexes in Europe were mixed as Germany’s DAX and France’s CAC 40 were largely flat, whereas the U.K.’s FTSE 250 shed 0.2%.

The Swiss franc depreciated 0.1% against the U.S. dollar, with 1 franc buying $1.09 whereas the euro and the British pound gained 0.2% and 0.4% respectively against the dollar.

In commodities, Brent crude declined 0.1% to $75.32 a barrel. Gold rose 0.3% to $1,783.20 a troy ounce.

The yield on German 10-year bunds fell to minus 0.160% and 10-year gilts yields declined to 0.776%. The yield on 10-year U.S. Treasury was down to 1.522% from 1.535% on Friday. Yields move inversely to prices.

Stocks in Asia mostly slipped as Hong Kong’s Hang Seng lost 0.2%, Japan’s Nikkei 225 index traded broadly flat and fell 0.1%, and China’s benchmark Shanghai Composite was broadly flat.

The New York Stock Exchange was decorated for the initial public offering for Mister Car Wash on Friday.



Photo:

Zuma Press

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Europe’s New Common Bonds Prove a Hit With Investors | Sidnaz Blog


Investors are lapping up Europe’s new common bonds, proving strong demand for supersafe assets in a region starved of them.

The price of the new bonds have rallied since the first €20 billion worth, equivalent to $24 billion, were sold last week, pushing down their yield.

The new bonds could help narrow the gap in borrowing costs between countries such as Germany and Italy. The EU bonds will likely divert demand away from German bonds, until now Europe’s key benchmark risk-free asset, while also boosting the Italian economy, according to some investors and analysts. A large gap in borrowing costs is seen by investors as a sign of financial stress in the region.

While the U.S. has spent trillions of dollars on stimulus checks and unemployment benefits to carry the economy through the pandemic, Europe has been slower to get its act together, hamstrung in part by the conservative economic attitudes among many northern states and political dysfunction and weak economies in some southern states.

The European Union’s nearly €800 billion recovery plan should start to turn the tide. It is the first major pan-European debt issuance program collectively backed by all the member states. The stronger economies, such as Germany and the Netherlands, are in effect lending the strength of their balance sheets to help fund recovery efforts in the weaker south.

“It will be a key support for the economic recovery as the continent emerges from the pandemic,” said

Dean Turner,

an economist in

UBS’s

Global Wealth Management business.

The EU is expected to start distributing the money over the summer and the spending will be equivalent 0.7% of European gross domestic product this year, rising to 1.2% to 1.3% for each of the next three years, Mr. Turner said.

As well as helping to fund the recovery, the triple-A-rated EU bonds will also help to alleviate a shortage of safe assets, which is one of the reasons that German bonds trade at such deeply negative yields, according to Oliver Brennan, head of research at TS Lombard.

There are only about €2.2 trillion worth of German government bonds outstanding and more than two thirds of those are owned by the European Central Bank and other central banks or foreign reserve managers, leaving just a few hundred billion euros’ worth for all other institutions to buy, according to Mr. Brennan.

But from 2022 onward, the EU recovery fund will likely become the largest source of new bonds, selling roughly €150 billion each year, overtaking Germany, France and Italy.

“The recovery fund will ease the safe-asset shortage by offering an alternative home for foreign reserve managers,” Mr. Brennan said. The amount of German bonds available for other investors to buy will slowly increase and their yields will begin to rise, he added.

The Colosseum in Rome. The new EU bonds will likely boost the Italian economy, according to some analysts and investors.



Photo:

filippo monteforte/Agence France-Presse/Getty Images

The moves are nascent so far, but since the EU issuance, German 10-year bond yields have risen to minus 0.215% from minus 0.270%, while the EU bond yields fell as low as 0.03% this week from 0.086%, according to Tradeweb. The EU bonds sold off slightly in line with the rest of the European government bond market on Friday.

More of the recovery fund will be spent on countries like Italy and Spain, where the pandemic has dealt a heavier blow than in countries like France and Germany. Italy is expected to receive more than 25% of the funds, while Germany will get less than 5%.

“Germany is one of the largest net contributors to the fund, while Italy is one of the largest net recipients,” Mr. Brennan said.

He recommends buying Italian bonds versus German bonds to bet on a narrowing of the spread—the difference in yields between the two.

That difference is currently about 1.05 percentage points for 10-year bonds, close to a recent low set in mid-February. The gap was as large as 3.2 percentage points in November 2018 and more than 5.3 percentage points during the worst phase of the eurozone debt crisis in 2012.

Before 2008, the gap was typically less than 0.3 percentage point, according to Tradeweb.

Write to Paul J. Davies at [email protected]

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