source: www.reuters.com

Fri Dec 12, 2008 4:21am ES

WARSAW, Dec 12 (Reuters) - Polish companies have so far owned up to 500 million zlotys ($166 million) in losses from currency hedging after being wrong-footed by the zloty's drop since September, the economy ministry said on Friday.

The ministry launched a phone line earlier this week for companies to seek help related to their problems with currency options and has so far received feedback from 85 companies.

"That's the information we've received since the line was set up four days ago," an economy ministry representative who operates the helpline and declined to be named told Reuters.

"It is difficult to assess the scale for the time being because we don't know how many more calls we will get. Some companies will probably never get in touch with us."

A spokesman for the ministry declined to comment further, saying a statement would be released by Monday.

Economy Minister Waldemar Pawlak warned last week that losses on currency hedging could total tens of billions of euros as Polish exporters were forced to settle options contracts with banks.

But in a television interview on Thursday, the head of Poland's financial and markets watchdog said the scale of the problem was insignificant relative to the size of the economy, which stood at around $480 billion at the end of last year.

The financial regulator has asked banks and companies to provide information on their exposure to hedging contracts and planned its own report on the issue.

Many Polish exporters took out hedging contracts to protect their earnings as the Polish currency soared to a record high against the euro in July.

Those bets turned sour after the zloty then shed around a fifth of its value, hurting several listed companies, including Poland's top chemical producer Ciech CECH.WA and fire-proof material maker Ropczyce ROPC.WA.

Some analysts said those contracts could weigh on company results for years to come, potentially as far out as 2011. Concerns about the scale of the problem have contributed to a further decline in the zloty over the last several days. (Reporting by Piotr Skolimowski; Edited by Chris Borowski/Will Waterman)

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source: money.cnn.com

Investor Daily: Solid corporate issues are offering juicy yields.
By Shawn Tully and Mina Kimes
December 12, 2008: 5:21 AM ET

(Fortune Magazine) -- Boring is beautiful - or so it feels in this time of wild and crazy stock market swings. In this case we're talking about investment-grade corporate bonds, which are dirt-cheap right now for the same reason that stocks are: The market turmoil has pounded down their prices. The result is historic opportunities in bonds issued by blue-chip companies.

Right now investment-grade bonds maturing in ten years or longer are yielding an average 8.4%, according to Barclays, a remarkable 5.7 percentage points more than ten-year Treasuries. "Today's spreads are the highest we've seen since 1931," says economist Michael Darda of MKM Partners, a trading and research firm. Or as bond guru and PIMCO chief Bill Gross keeps saying, stocks are pricing in a recession, and bonds are priced for a depression. A depression isn't likely, so it's time to pounce.

In general, buying individual bonds isn't ideal. You'll need to go through a broker, and the commissions can be high. If you choose that route, you should buy at least four or five issues to diversify and stick with pummeled but steady performers like Verizon Wireless, Comcast, Xerox, and Altria, all of which offer yields of more than 8% on their ten-year bonds.

The best way to buy corporate bonds is through mutual funds. Since they own big baskets of bonds, you won't see your gains evaporate if a few holdings get downgraded or default, a major danger when you own individual issues.

Your choices fall into two broad categories. The first is for the cautious. It consists mostly of what amount to index funds; the securities are highly rated, and the expenses minimal, but the yields are relatively low. Here are two excellent choices: Vanguard Intermediate-Term Investment-Grade (VFICX). More than two-thirds of the holdings - including the likes of McDonald's and Medtronic - are rated A and above by S&P. Expenses are a tiny 0.2% and the 30-day yield stands at 7.5% (as of Dec 4). iShares iBoxx $ Investment Grade Corporate (LQD) tracks a fixed-income index for 100 household names. The portfolio is even more blue-chip than Vanguard's, and the yield is 7.3%.

The second category is for the more adventurous. The managers of these funds select lower-rated bonds that yield far more and even offer an extra kicker in capital gains. T. Rowe Price's Corporate Income Fund (PRPIX) concentrates on the lowest end of investment grade and favors high-yielding bank bonds - including J.P. Morgan's and Bank of America's - reckoning that government aid substantially reduces their risk. Its yield is 8.2%. For investors seeking bigger yields, there is Loomis Sayles Bond Fund (LSBRX). It focuses on beaten-down bonds in solid, noncyclical companies such as Kraft and Verizon. The current yield is a rich 11.2%.

For all the opportunities in corporate bonds, it's worth noting that both Treasury Inflation Protected Securities (TIPS) and municipal bonds are unusually good deals right now. In the case of TIPS, the principal is adjusted in line with the consumer price index, guaranteeing that you won't lose ground to inflation. The yield on ten-year TIPS issued in July is now 1.9%, or just 0.6 point lower than that of a ten-year Treasury, which doesn't offer inflation protection. You can buy TIPS through brokers like Schwab or at www.treasurydirect.gov. Fund investors have lots of attractive, low-expense choices, including Vanguard Inflation Protected Securities Fund (VIPSX) and T. Rowe Price Inflation Protected Bond (PRIPX).

Tax-free municipal bonds also offer extra wallop right now. Munis usually deliver lower yields than Treasuries, but the recent exodus to T-bills and bonds - and growing concerns about state credit ratings (hello, California) - has driven prices south and yields north. A triple-A-rated ten-year muni now yields 4.2%, compared with 2.5% for a Treasury. Add the tax savings, and the effective yield for someone in the highest federal bracket (35%) would be 6.5%. While defaults remain unlikely, we recommend eschewing individual bonds and single-state funds and going with funds that hold munis from across the country, such as Fidelity Tax-Free Bond (FTABX), which has an average annual return of 2.4% over the past five years, or Vanguard Long-Term Tax-Exempt (VWLTX) , which has an average five-year return of 1.8%. Like the TIPS and corporates, the munis are a tad drab; they're not the sort of glitzy investment you brag about at parties. But with their strong yields, that won't matter. To top of page

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source: www.bloomberg.com

By Theresa Barraclough

Dec. 12 (Bloomberg) -- Japan’s five-year notes rose the most in six weeks as stocks tumbled after the U.S. Senate rejected a $14 billion bailout plan for the nation’s automakers.

The securities completed a weekly gain as Toyota Motor Corp., which gets more than half its profit in North America, led losses in the Nikkei 225 Stock Average, driving demand for the safety of government debt. The dollar slumped below 90 yen for the first time in 13 years. Bonds also advanced after the Nikkei newspaper said the Bank of Japan may next week provide its worst assessment of the economy since May 2002.

“With the anxiety of the Big Three and the appreciation of yen to these levels, there is no alternative to buying bonds,” said Jun Fukashiro, senior fund manager at Toyota Asset Management Co. in Tokyo.

The yield on the 0.9 percent bond due December 2013 fell five basis points to 0.85 percent as of 3:20 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price rose 0.239 yen to 100.239 yen. Yields declined three basis points this week.

Ten-year yields declined two basis points, or 0.02 percentage point, today to 1.39 percent. Ten-year bond futures for March delivery jumped 0.77 to 139.42 at the afternoon close at the Tokyo Stock Exchange.

The dollar fell as low as 88.53 yen, the weakest since August 1995, and the Nikkei 225 Stock Average slid 5.6 percent.

Japan’s bonds typically move in the opposite direction to stocks. Benchmark 10-year yields had a correlation of 0.78 with the Nikkei 225 in the past two weeks, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.

‘Over With’

“It’s over with,” Majority Leader Harry Reid said late Dec. 11 on the Senate floor in Washington, referring to the automaker bailout. “I dread looking at Wall Street tomorrow.” The Senate thwarted the bailout plan when a bid to cut off debate on the bill fell short of the required 60 votes.

“The U.S. bailout plan is affecting the stock market” boosting bonds, said Takashi Nishimura, an analyst at Mitsubishi UFJ Securities Co., a unit of Japan’s largest bank by assets, in Tokyo. “The downgrading of the economic assessment is a step forward toward another rate cut.”

The Bank of Japan may change its assessment of economic activity to “worsening,” from “increasingly sluggish,” at its two-day policy meeting ending Dec. 19, the Nikkei newspaper said, without citing anyone. BOJ Deputy Governor Hirohide Yamaguchi said yesterday policy makers need to be aware that downside risks are increasing and the bank needs to consider various options when setting policy.

Tankan Index

The Tankan index of confidence among large makers of cars and electronics will slide to minus 23 in December from minus 3, according to the median estimate of economists surveyed by Bloomberg before the Dec. 15 report. The decline would be the biggest since 1975, when it fell 21 points in the wake of the first oil shock. A negative number means pessimists outnumber optimists.

“Next week’s Tankan is bond-buying material,” said Akihiko Inoue, an analyst in Tokyo at Mizuho Investors Securities Co., one of the 24 primary dealers that are required to bid at government debt sales.

There is a 36 percent chance the BOJ will cut borrowing costs by the end of March, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps. The key overnight lending rate is 0.3 percent.

Demand for bonds was limited on concern the government will sell additional debt to cover a shortfall in tax revenue. Issuance for the year ending March 31 will rise from the originally planned 105.1 trillion yen ($1.15 trillion), two finance ministry officials said Dec. 10.

Lower Rates

The finance ministry will also boost debt sales to investors including banks and life-insurance companies in the year starting April 1, according to a Bloomberg survey of primary dealers. Bond offerings to private investors will rise to 112.8 trillion yen next fiscal year, the survey showed. The finance ministry will announce its issuance plan on Dec. 19.

The Asahi newspaper reported today that the government plans to provide 3 trillion yen to large and midsize businesses by buying their commercial paper and lending money at low rates.

The plan may alleviate pressure on bank lending and lead to lower money-market rates, allowing investors to borrow more money to invest in bonds, said Hitomi Kimura, a bond strategist at JPMorgan Securities Japan Co., another primary dealer.

“It’s positive for the money-market for now,” Tokyo-based Kimura said. “Two- and five-year notes will have room to rally if rates come down.”

One-month commercial paper with the second-strongest credit rating yielded 1.9 percent today, more than double the Tokyo interbank offered rate for yen loans, according to Tokyo Tanshi Co. Three-month Tibor rose to 0.915 percent today, the 25th day of gains, Bloomberg data show.

To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

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source: www.reuters.com

Mon Dec 1, 2008 7:17am EST
By Veronica Brown

LONDON, Dec 1 (Reuters) - The Japanese yen strengthened broadly on Monday as slumping Chinese and European manufacturing activity kept investors on edge and dragged world share prices down.

Yen strength also weighed heavily on currencies of countries where central banks are expected to slash interest rates later this week including the euro, sterling and Australian dollar.

The Bank of Japan, meanwhile, whose key interest rates are a mere 0.3 percent, said it will hold an emergency meeting on Tuesday to discuss changes in the use of corporate debt for collateral banks put up to access central bank funds. With economies already slowing sharply around the world sensitivity to output figures was high.

Manufacturing activity in the euro area, which has already entered recession, hit a record low in November. [ID:nLR485231]. Economic powerhouse China also saw its manufacturing industry slump in November as new orders, especially from abroad, tumbled [ID:nPEK123652]

Resulting risk aversion took global share prices, as measured by MSCI's all country index, down 1 percent on the day [.MIWD00000PUS], while yen gains against major rival currencies accelerated sharply.

"The data is just so terribly poor that it's going to be difficult for any kind of period of sustained uptrend in confidence," said Derek Halpenny, European Head of Global Currency Research at BTM UFJ in London.

"Until we're through the deterioration in the data then the likelihood is that risk aversion will remain elevated and we'll see renewed interest in lower yielding currencies," he added.

By 1150 GMT, the dollar was down 1.7 percent against the yen at 93.88 yen and the euro was down 1.9 percent versus the Japanese unit at 118.93 yen .

The euro fell 0.2 percent against the dollar to $1.2667 , while sterling was off 2.2 percent against the greenback at $1.5045 .

Sterling's losses were exacerbated after British figures showing manufacturing activity had shrunk at a record pace.

RATES FOCUS

The Bank of England, the European Central Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand are all expected to cut rates by at least half a percentage point, diminishing the yield advantage of their currencies over the ultra-low yielding yen.

Analysts expect those four major central banks to cut rates aggressively to counter the threat of deflation and prevent the global financial market crisis from spilling over into further economic weakness.

Yen crosses reflected those expectations, with sterling/yen , Australian dollar/yen and New Zealand dollar/yen all down more than 3 percent on the day.

Analysts expect the RBA to cut its benchmark cash rate by 75 basis points to 4.50 percent on Tuesday. But data on Monday showing Australian inflation slowing much faster than earlier thought and manufacturing activity at record lows in November bolstered the case for a steeper cut in rates. [ID:nSYD363959]

The RBNZ is expected to lop a full 1.5 percentage points off its key rate to 5 percent, which would match the magnitude of the Bank of England's surprise cut last month.

Economists polled by Reuters expect the BoE to follow that up with a more modest 50 basis point cut to 2.5 percent on Thursday, but futures traders are pricing in a more aggressive 100 basis point reduction.

The ECB is expected to cut by half a percentage point on Thursday to 2.75 percent but the weakness of recent economic and inflation indicators is building the pressure for a deeper cut.

The euro zone manufacturing sector, for example, contracted sharply in November, data showed on Monday. [ECON]

"Polls show economists are expecting the ECB to cut by 50 basis points but marketwise, there would be disappointment if the ECB did 50 basis points," said Steve Barrow, head of currency strategy at Standard Bank in London.

Financial markets in the United States should return to normal liquidity and trading conditions on Monday following last week's Thanksgiving holiday.

Investors will be keeping an eye on the November jobs report on Friday. Later on Monday the Institute for Supply Management releases its November manufacturing index. [ECONUS] (Reporting by Veronica Brown and Swaha Pattanaik; editing by Toby Chopra)

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Mon Dec 1, 2008 8:54am EST

source: www.reuters.com

NEW YORK, Dec 1 (Reuters) - General Motors Corp's (GM.N: Quote, Profile, Research, Stock Buzz) bonds fell nearly 12 percent early on Monday as investors awaited a new turnaround plan from the automaker aimed at winning support for emergency government funding.

GM's 7.125 percent notes due in 2013 fell to 23 cents on the dollar, down from 26 cents on Friday, according to MarketAxess. GM is due to submit a restructuring plan by Tuesday, the same day that November sales from major automakers are expected to show only a limited bounce from 25-year lows. For details click on [ID:nN30477996]. (Reporting by Dena Aubin; Editing by Theodore d'Afflisio) (dena.aubin@thomsonreuters.com; +1-646-223-6325; Reuters Messaging: dena.aubin.reuters.com@reuters.net))

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Thomson Financial News
12.01.08, 01:40 AM EST

By Kelvin Soh

TAIPEI, Dec 1 (Reuters) - Taiwan stocks rose 1.3 percent to a fresh two-week closing high on Monday, as financial shares such as Taishin Financial surged on expectations of the signing of a cross-strait financial services agreement.

The main TAIEX share index closed 57.94 points higher at 4,518.43, its highest close since Nov. 12, as tourism shares also gained on hopes of higher Chinese tourist numbers.

The banking and insurance sub-index jumped 4.02 percent, while Taishin rose by its 7 percent daily limit.

Turnover was thin at T$66.9 billion ($2 billion), but higher than Friday's T$57.7 billion, and was the highest level in about three weeks.

'We expect the cross-strait financial services agreement to be signed in the first half of next year, so that is pushing financial stocks up," said Andy Wu, an analyst at Reliance Securities.

'Sean Chen (the newly appointed chairman of the Financial Supervisory Commission) is also more interventionist than his predecessor, so I think the market expects more support if there is trouble.'

Tourism shares got a boost from local media reports that Taiwanese companies were sending their Chinese employees to Taiwan for junkets.

The island's two major airlines, China Airlines and Eva Airways, both went limit up as an increase in Chinese tourists would be good for their load factors.

Hotel operators also benefited, with Ambassador Hotel climbing limit up. The tourism and transport sub-indexes both closed more than 3 percent higher.

'Airline share prices have been falling for a while now,' said Theresa Chueh, an analyst at Taiwan International Securities.

'They were first hit by surging oil prices when the economy was doing well, then they were hit by fears of falling demand when the economy was doing badly, so there is some correction today.'

The tech sector also managed to fight off a slew of bad news, with the electronics sub-index closing 0.46 percent higher.

Hon Hai was 1.4 percent higher at the session's close, after its subsidiary Foxconn announced on Friday it would lay off 1,500 workers in Hungary, more than half of its total workforce in the country, as orders waned.

Top contract chipmaker TSMC also managed to shake off the morning's losses to close unchanged after it told department heads to cut costs by 20 percent.

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U.S. Stock-Index Futures Drop; GE, Caterpillar, Anadarko Fall
U.S. stock-index futures declined, indicating the Standard & Poor’s 500 Index may snap a five-day stretch of gains, on concern the global economic slump is deepening.

Yen Strengthens as Manufacturing Slump Weakens Yuan, Ruble
The yen rose against the euro and the dollar as falling stocks and shrinking manufacturing in China and Russia encouraged investors to buy back the Japanese currency at the expense of higher-yielding assets.

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President-elect Barack Obama introduced the nation to his economic team at a series of no- frills press conferences last week. The choices spell experience.

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