Incredible inflation level, which could reach 8 million percent this year, provided Venezuela with the status of the world's most “miserable” economy. For the fifth consecutive year, the South American state tops the rating of the most poor economies in the world, which Bloomberg agency calculates based on inflation and unemployment forecasts. Thailand again gained the title of the "least miserable" economy, however, the peculiar method of calculating unemployment makes this result less impressive than moving Switzerland to the second position and maintaining Singapore’s third “prize” place. The US moved up six spots to 13th place in the ranking of the least unfortunate, and the UK moved up four places to 16th place. The Bloomberg misfortune index is based on the age-old notion that low inflation and unemployment are indicators of how well a country’s citizens live. This year, the ranking is based on the agency’s surveys of economists, not official statistics, as in previous years. At the same time, persistently low prices may indicate weak demand, and too low unemployment complicates the task of finding a better job. Russia dropped in the group of the most unfortunate at 17 levels to 17th place, which is associated with forecasts of accelerated price increases and with a steady level of unemployment. The acceleration of inflation in the past month has complicated the central bank’s plans to transition to easing monetary policy. A group of the most unfortunate economies were Argentina, South Africa, Turkey, Greece and Ukraine - all of them retain the same positions as last year together with Venezuela. These countries continue to struggle from economic difficulties, demonstrate weak successes in restraining rising prices and combating unemployment.
For the Chinese economy, the rapid growth of which was accompanied by a record increase in debt reaching 250% of GDP, another alarm bell rang. After the "epidemic" of defaults on bonds last year, when the number of overdue payments jumped four times, to 120 billion yuan, the non-payment crisis spread to the financial sector. According to Bloomberg, China Minsheng Investment Group, China’s largest private investment fund, is on the verge of bankruptcy. Back in February, a company with assets of 310 billion yuan, or $ 45.5 billion, was unable to redeem bonds for 3 billion yuan, and now, under the provisions on cross default, is obliged to pay $ 800 million to Eurobond holders immediately. The fund, whose debt exceeds $ 35 billion, apparently does not have funds. The company notified the Hong Kong Stock Exchange that it hired lawyers to Kirkland & Ellis, and the banks collected a committee of creditors, which usually preceded a bankruptcy with the exchange of debt for shares. The crisis around CMIG, which was called the Chinese JPMorgan, “will intensify, and lenders will seek to freeze its assets if it defaults on bonds,” says Qingdao Rural Commercial Bank, Chen Su. The problem will not be resolved until CMIG finds interested investors, he adds. While such investors are not visible: the dollar bonds of the company are traded at 40% of the nominal value - at the level of Venezuelan government bonds. The problem of the Chinese financial sector and the economy as a whole is that the entire growth model of the last ten years is built on a chronic increase in debt, analysts at GNS Economics write. Moreover, the effectiveness of this credit "doping" is steadily decreasing: if, until 2008, debt grew only slightly faster than GDP, in the past decade this discrepancy has more than tripled. Since 2007, debt has increased by 25 trillion dollars and the economy - only by 7.6 trillion. In other words, for every dollar of new debt in China, only 33 cents of new GDP is created.
JPMorgan Asset Management buys US Treasury bonds and sells junk bonds to hedge risks amid forecasts of a slowdown in the global economy. Arjun Widge, a portfolio manager, involved in managing the JPMorgan Global Bond fund, has increased long positions in US government securities with maturity in 10 years amid growing attractiveness in the pigeon mood of the Federal Reserve System. The fund has cut investment in high-yield corporate bonds to about 5% from 8% in January. “For the last six to eight months, we have been slowly increasing the duration,” said Vijj in a telephone interview from Hong Kong. “If the rates increase a little, we will likely increase these positions more than we do something else.” Strategists at banks like Goldman Sachs Group Inc. and Morgan Stanley lowered their yield forecasts for treasury bonds, waiting for the rally to continue. The yield on 10-year bonds fell to 2.57% from a seven-year high of 3.26% in October.
Germany is often called the engine of economic growth in Europe, but the latest forecast of the German government for 2019 calls into question this status. Now, the authorities expect the economy to grow by 0.5% by the end of the year, which, according to the February forecasts of the European Commission, possibly the worst indicator among the countries of the alliance, apart from Italy that is undergoing stagnation. Economy Minister Peter Altmayer said Wednesday that "the current weakness of the German economy should be considered a signal for action."
Source: iXBT.com
Investors who are looking for the best trading idea to earn money on the postponement of the UK exit from the European Union, look across the border - at the bonds of Ireland. These papers seem to offer the right balance of security and profitability since the Brexit deferment reduces concerns about the most sensitive issue in this process - the border with Ireland. Irish debt obligations with a higher rating than bonds of peripheral eurozone countries, including Italy, this year showed a better result than French and Belgian securities. Morgan Stanley expects Irish bonds to continue to grow against the backdrop of optimism that the UK and the EU will be able to avoid the Brexit destabilising option after the parties agreed to postpone the release until October 31. The bank recommends buying 10-year Irish bonds and selling Belgian notes with similar maturity, while JPMorgan Chase & Co. advises long positions on five-year Irish papers against French peers. Morgan Stanley expects Irish 10-year yields to fall below the rate on similar Belgian bonds, and the spread between them could be as low as 10 basis points, which was last observed in 2007. Now the difference is 7 basis points, and the yield on Ireland's 10-year bonds on Monday was at the level of 0.59%. JPMorgan prefers to buy five-year Irish bonds and sell French "on expectations that the silence around Brexit will create an environment for the further advancing dynamics of Ireland," the bank's strategy wrote in a review. They prefer five-year papers, as the growth of 10-year indicative bonds may limit the possible increase in supply at auctions.
