Agnes's Feed
Mar 9, 2011
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Government-fueled bull run leaves markets vulnerable

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The run-up in global stocks is two years old. The MSCI global index is up 94 percent from March 9, 2009, the post-financial crisis low point. Credit markets, ground zero for the crisis, are thriving, and economic activity is back on its feet. Yet the government actors behind the rebound, notably in Washington, look spent. Financial markets are out on their own for future shocks.

Mar 9, 2011

Govt-fueled bull run leaves markets vulnerable

– The author is a Reuters Breakingviews columnist. The opinions expressed are her own –

By Agnes T. Crane

NEW YORK (Reuters Breakingviews) – The run-up in global stocks is two years old. The MSCI global index is up 94 percent from March 9, 2009, the post-financial crisis low point.

Mar 4, 2011
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Higher rates double trouble for US muni investors

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

NEW YORK — Rising interest rates are bad for bond investors generally. But in the $3 trillion municipal debt market where U.S. states, cities and other public entities raise funds, hysteria over possible defaults already has investors rattled. When rates rise and more paper losses accumulate, some may simply give up.

Feb 16, 2011
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Illinois badly needs help from bond market

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Selling debt to fund public pensions is a bad idea. Jon Corzine, former Goldman Sachs chief and one-time governor of New Jersey, called it “the dumbest.” Yet Illinois, the exemplar of fiscal train wrecks, wants to borrow $3.7 billion to plump up its chronically underfunded pension schemes.

Feb 4, 2011
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U.S. housing reform at risk of stopping way short

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Agnes T. Crane

America’s mortgage market almost sank the world economy. But no one has yet done anything to fix it. After blowing two deadlines, the government’s ideas are finally due out as early as next week from the U.S. Treasury, and these recommendations will frame the debate. But the danger is they will be premised on dogma that should in fact be seriously questioned.
Proposals have been circulating ever since the previous administration seized Fannie Mae and Freddie Mac in 2008. Most agree that both entities should be wound down, one way or another. But whether government should still have a role subsidizing housing finance is still up for grabs — or rather, few seem able to resist the idea that it should. The trouble is that financial types have become accustomed to a government safety net, and few of the constituencies involved are willing to challenge key U.S. housing myths.

Myth 1: Significant reform will kill the housing market.

Many fear any major overhaul of U.S. housing finance will slam a still tottering housing market. If America scraps its current system tomorrow, that’s what will happen. At a minimum, removing the government subsidy should nudge mortgage interest rates higher, potentially knocking home prices down further. But the UK took more than a decade to phase out tax deductions on mortgage interest. Homeowners, would-be homeowners and mortgage lenders can adapt to even a potentially wrenching change if there’s a five or 10-year transition period. The United States needs to get started on a plan.

Myth 2: The U.S. mortgage market is too big for the private sector to handle alone.

The $10.6 trillion mortgage market is huge, and Fannie and Freddie own or guarantee roughly half of it. But the size of the market — and the secondary market in securitized mortgages, and so on — was part of the problem in the years leading up to the 2008 crisis. The market is already down from its $11 trillion peak, but it is still nearly twice as big as in 2001. With the national average home price down more than 30 percent from its highs and millions of homeowners in danger of foreclosure, it’s clear only a smaller mortgage market is really sustainable.

Jan 31, 2011
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CDS market shows U.S. risk-free status slipping

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Betting on Treasury yields rising is one thing; trading the chance of default is another. U.S. credit default swap volumes have spiked in recent weeks. The CDS activity around Uncle Sam’s debt is still hardly mainstream. But unsustainable federal borrowing is tarnishing the debt market’s once pristine, risk-free benchmark.

Jan 21, 2011
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Does GE gain by lending the White House its CEO?

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

When theĀ  president asks for help it would be difficult for even the busiest corporate chief to say no. It’s even harder when he owes the federal government a big favor. And so it is that Jeffrey Immelt, General Electric’s longstanding boss, is heading to Washington to advise Barack Obama on how to make the United States a job-creating colossus again.

Jan 20, 2011
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Petrobras better bond bet than Brasilia

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Petrobras, Brazil’s energy giant, will pay bond investors a percentage point more than the government that controls it. With sovereign bond yields so low and inflation flaring up, bond-buying fanciers of this BRIC could be better off lending to its oil-backed corporate proxy.

Jan 19, 2011
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Bankruptcy code won’t cure what ails U.S. states

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Today, there’s no U.S. federal bankruptcy process for states — though there is for municipalities and, of course, for companies. Veteran Republican Newt Gingrich and other conservatives want to change that. So far, though, the proposal smacks of politics and ivory-tower musing rather than practical policy.

Jan 4, 2011
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Latest corporate debt deals offer inflation hedge

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

It may still be only a twinkle in investors’ eyes, but eventually easy money and a recovering U.S. economy will bring rising prices. A slew of floating-rate issuance by Corporate America’s heavyweights is giving inflation worriers an early chance to protect themselves.