Bloomberg
“Venezuela’s Behind on Its Debt and Facing Two Huge Bond Payments.”
Ever since the price of oil collapsed in mid-2014, there’s been a broad consensus among the bond-market crowd that Venezuela was going to default. Not immediately, they said, but at some point down the road. Three years on, that time may have arrived. On Friday, the government-run oil giant PDVSA owes $985 million. Six days later, it’s on the hook for another $1.2 billion. Not only is that a daunting sum for a country whose foreign-currency reserves recently dipped below $10 billion for the first time in 15 years, but it figures to be a logistical nightmare too.
Increasingly isolated by U.S. financial sanctions that have spooked banks and other intermediaries in the bond payment chain, Venezuela has already fallen behind on interest payments worth $350 million that were due earlier this month. Those payments had a grace period — a buffer of sorts that gives the country an additional 30 days to work out the technical glitches and deliver the cash. The principal portions of the payments owed over the next two weeks contain no such language. Miss the due date and bondholders can cry default. Prices on the notes due Nov. 2 acutely reflect those risks: They’re at just 92 cents on the dollar.
The government had another $237 million in interest payments come due Saturday, and the National Public Credit Office has yet to announce their payment. A delay in those payments would bring the total in arrears to $587 million.
And because yields on the bonds have been so high, the returns have been eye-catching: over 9 percent per year on average over the past 20 years. This combination — outsize profits for Wall Street traders and shortages of food and medicine for Venezuelans back on the ground — has been so jarring that it even led to the coining of a new term for the nation’s debt: hunger bonds.
Even if Venezuela can make the payments due this year, investors say that, unless oil prices stage some sort of miraculous comeback, they still see default as an inevitable outcome. Credit-default swaps show they’re pricing in a 75 percent chance of a PDVSA default in the next 12 months and 99 percent in the next five years.
BBC News
“RBS faces ‘further action’ by financial regulator.”
The financial regulator has said it may take «further action» over the way Royal Bank of Scotland treated some small business customers. The Financial Conduct Authority (FCA) has published an interim report into the conduct of the unit set up by the bank to help struggling businesses.
FCA chief Andrew Bailey said it was investigating whether there were grounds for action against the bank. RBS said it had acknowledged failings and again apologized for the mistakes.
The bank’s Global Restructuring Group operated from 2005 to 2013 and at its peak handled 16,000 companies. The FCA, which came under pressure to publish the report by MPs, identified a number of failings at RBS.
But the bank’s chief executive, Ross McEwan, said the «most serious allegations made against the bank have not been upheld». He added: «The culture, structure and way RBS operates today have all changed fundamentally since the period under review.»
Bloomberg
“JPMorgan Taps AI Startup to Help Traders Predict Market Moves.”
At the world’s biggest debt dealer, traders can have trouble making sense of all the action as it happens. So JPMorgan Chase & Co. is bringing in artificial intelligence to give them a picture of the whole trading floor — and even predict where markets are going.
MSX, a data analytics and machine-learning program, is being deployed in the bank’s fixed-income sales and trading operations, New York-based JPMorgan said Monday in a statement. It will compile data from all desks and orders to give salespeople and traders a clearer picture in real time and help them anticipate market moves. Developed by London-based startup Mosaic Smart Data, the program is already used in JPMorgan’s rates trading.
JPMorgan, which generated $15 billion in revenue from its fixed-income business last year, is among banks introducing machine learning and artificial intelligence in capital-markets units. The latest move is about improving the performance of salespeople, not replacing them, said Mosaic Chief Executive Officer Matthew Hodgson.
Mosaic previously partnered with JPMorgan through the bank’s “In-Residence” fintech startup development program created in 2016. Mosaic is the first company to complete the program, which gives startups six months of access to JPMorgan’s people, facilities and systems.
The software can identify patterns in data that JPMorgan already generates. It aims to predict client behavior and offer them ideas they’re more likely to be interested in.
Reuters
“Japan’s Abe to push pacifist constitution reform after strong election win.”
Prime Minister Shinzo Abe, buoyed by a huge election win for lawmakers who favor revising Japan’s post-war, pacifist constitution, signaled a push towards his long-held goal on Monday but will need to convince a divided public to succeed.
Parties in favor of amending the U.S.-drafted charter won nearly 80 percent of the seats in Sunday’s lower house election, media counts showed.
That left the small, new Constitutional Democratic Party of Japan (CDPJ) as the biggest group opposed to Abe’s proposed changes.
Amending the charter’s pacifist Article 9 would be hugely symbolic for Japan. Supporters see it as the foundation of post-war democracy, but many conservatives view it as a humiliating imposition after Japan’s defeat in 1945.
It would also be a victory for Abe, whose conservative agenda of restoring traditional values, stressing obligations to the state over individual rights and loosening constraints on the military, centers on revising the constitution.
“Mr. Abe is trying to create a legacy. His first legacy project was to get the economy out of deflation,” said Jesper Koll, head of equities fund WisdomTree Japan.
Abe proposed last May adding a clause to Article 9 to legitimize Japan’s Self-Defense Force. Read literally, Article 9 bans a standing military but has been interpreted to allow armed forces exclusively for self-defense. Parliament enacted laws in 2015 allowing Japan to exercise collective self-defense, or aid allies under attack, based on a reinterpretation of the constitution rather than a formal revision.
Opinion polls show the public is divided on Abe’s proposal. An NHK survey before the election showed 32 percent in favor, 21 percent opposed, and 39 percent unsure.