Tag Archives: Silver Prices

LONDON (Reuters) – Traditional debt crisis signs of crashing currencies, 1,000 basis point bond spreads and burned FX reserves point to a record number of developing nations now in trouble.Lebanon, Sri Lanka, Russia, Suriname and Zambia are already in default, Belarus is on the brink and at least another dozen are in the danger zone as rising borrowing costs, inflation and debt all stoke fears of economic collapse.Totting up the cost is eyewatering. Using 1,000 basis point bond spreads as a pain threshold, analysts calculate $400 billion of debt is in play. Argentina has by far the most at over $150 billion, while the next in line are Ecuador and Egypt with $40 billion-$45 billion.Crisis veterans hope many can still dodge default, especially if global markets calm and the IMF rows in with support, but these are the countries at risk.ARGENTINAThe sovereign default world record holder looks likely to add to its tally. The peso now trades at a near 50% discount in the black market, reserves are critically low and bonds trade at just 20 cents in the dollar – less than half of what they were after the country’s 2020 debt restructuring.The government doesn’t have any substantial debt to service until 2024, but it ramps up after that and concerns have crept in that powerful vice president Cristina Fernandez de Kirchner may push to renege on the International Monetary Fund. GRAPHIC: The pain has spread- https://graphics.reuters.com/MARKETS-EMERGING/mopanaqkmva/chart.png UKRAINE Russia’s invasion means Ukraine will almost certainly have to restructure its $20 billion plus of debt, heavyweight investors such as Morgan Stanley (NYSE:MS) and Amundi warn.The crunch comes in September when $1.2 billion of bond payments are due. Aid money and reserves mean Kyiv could potentially pay. But with state-run Naftogaz this week asking for a two-year debt freeze, investors suspect the government will follow suit. GRAPHIC: Ukraine bonds brace for default https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrbaxrvm/Pasted%20image%201657725996621.png TUNISIAAfrica has a cluster of countries going to the IMF but Tunisia looks one of the most at risk.A near 10% budget deficit, one of the highest public sector wage bills in the world and there are concerns that securing, or a least sticking to, an IMF programme may be tough due to President Kais Saied’s push to strengthen his grip on power and the country’s powerful, incalcitrant labour union. Tunisian bond spreads – the premium investors demand to buy the debt rather than U.S. bonds – have risen to over 2,800 basis points and along with Ukraine and El Salvador, Tunisia is on Morgan Stanley’s top three list of likely defaulters. “A deal with the International Monetary Fund becomes imperative,” Tunisia’s central bank chief Marouan Abassi has said. GRAPHIC: African bonds suffering- https://fingfx.thomsonreuters.com/gfx/mkt/zdvxobognpx/Pasted%20image%201657541934055.png GHANA Furious borrowing has seen Ghana’s debt-to-GDP ratio soar to almost 85%. Its currency, the cedi, has lost nearly a quarter of its value this year and it was already spending over half of tax revenues on debt interest payments. Inflation is also getting close to 30%. GRAPHIC: How not to spend it- https://graphics.reuters.com/MARKETS-EMERGING/znpneakgkvl/chart.png EGYPT Egypt has a near 95% debt-to-GDP ratio and has seen one of the biggest exoduses of international cash this year – some $11 billion according to JPMorgan (NYSE:JPM). Fund firm FIM Partners estimates Egypt has $100 billion of hard currency debt to pay over the next five years, including a meaty $3.3 billion bond in 2024.Cairo devalued the pound 15% and asked the IMF for help in March but bond spreads are now over 1,200 basis points and credit default swaps (CDS) – an investor tool to hedge risk – price in a 55% chance it fails on a payment. Francesc Balcells, CIO of EM debt at FIM Partners, estimates though that roughly half the $100 billion Egypt needs to pay by 2027 is to the IMF or bilateral, mainly in the Gulf. “Under normal conditions, Egypt should be able to pay,” Balcells said. GRAPHIC: Egypt’s falling foreign exchange reserves- https://fingfx.thomsonreuters.com/gfx/mkt/zgpomxkqnpd/Pasted%20image%201657817324629.png KENYAKenya spends roughly 30% of revenues on interest payments. Its bonds have lost almost half their value and it currently has no access to capital markets – a problem with a $2 billion dollar bond coming due in 2024.On Kenya, Egypt, Tunisia and Ghana, Moody’s (NYSE:MCO) David Rogovic said: “These countries are the most vulnerable just because of the amount of debt coming due relative to reserves, and the fiscal challenges in terms of stabilising debt burdens.” GRAPHIC: Kenya’s concerns- https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnelzjvq/Pasted%20image%201657872126738.png ETHIOPIA Addis Ababa plans to be one of the first countries to get debt relief under the G20 Common Framework programme. Progress has been held up by the country’s ongoing civil war though in the meantime it continues to service its sole $1 billion international bond. GRAPHIC: Africa’s debt problems- https://fingfx.thomsonreuters.com/gfx/mkt/lbvgneokapq/Pasted%20image%201657727788029.png EL SALVADOR Making bitcoin legal tender all but closed the door to IMF hopes. Trust has fallen to the point where an $800 million bond maturing in six months trades at a 30% discount and longer-term ones at a 70% discount. PAKISTANPakistan struck a crucial IMF deal this week. The breakthrough could not be more timely, with high energy import prices pushing the country to the brink of a balance of payments crisis.Foreign currency reserves have fallen to as low as $9.8 billion, hardly enough for five weeks of imports. The Pakistani rupee has weakened to record lows. The new government needs to cut spending rapidly now as it spends 40% of its revenues on interest payments. GRAPHIC: Countries in debt distress at record high- https://fingfx.thomsonreuters.com/gfx/mkt/klpykyzxepg/Pasted%20image%201657728812497.png BELARUSWestern sanctions wrestled Russia into default last month and Belarus now facing the same tough treatment having stood with Moscow in the Ukraine campaign. GRAPHIC: Belarus bonds: https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrbzdmvm/Pasted%20image%201657848388314.png ECUADORThe Latin American country only defaulted two years ago but it has been rocked back into crisis by violent protests and an attempt to oust President Guillermo Lasso.It has lots of debt and with the government subsidising fuel and food JPMorgan has ratcheted up its public sector fiscal deficit forecast to 2.4% of GDP this year and 2.1% next year. Bond spreads have topped 1,500 bps. NIGERIABond spreads are just over 1,000 bps but Nigeria’s next $500 million bond payment in a year’s time should easily be covered by reserves which have been steadily improving since June. It does though spend almost 30% of government revenues paying interest on its debt. “I think the market is overpricing a lot of these risks,” investment firm abrdn’s head of emerging market debt, Brett Diment, said. GRAPHIC: Currency markets in 2022- https://fingfx.thomsonreuters.com/gfx/mkt/zgpomxnjrpd/Pasted%20image%201657869185784.png Continue reading →

(Bloomberg) — When FBI agents knocked on the door of his Brooklyn, New York, home in August 2018, trader John Edmonds told them he didn’t know anything about gold and silver price manipulation at JPMorgan Chase & Co. That was a lie, he admitted Thursday.Most Read from BloombergEdmonds, who worked at JPMorgan for about a decade, eventually pleaded guilty to conspiracy and commodities fraud and agreed to cooperate with prosecutors. He’s now a key government witness against his former boss, Michael Nowak, the longtime head of the precious-metals trading desk; gold trader Gregg Smith; and hedge fund salesman Jeffrey Ruffo.During two days of testimony at a criminal trial in Chicago, Edmonds described how the three senior executives routinely used “spoof” trades — huge orders that are quickly canceled before they can be executed — to push precious metals up or down from 2008 to 2016 to make trades for the bank and its clients more profitable. Edmonds said he learned how to spoof at JPMorgan.But Nowak’s defense lawyer David Meister, over several hours of cross examination Thursday, sought to undermine the credibility of Edmonds, who testified earlier that he’d committed no crimes since leaving JPMorgan in 2017.Meister questioned Edmonds about his FBI interview in 2018, and played a recording of the encounter made by the agents.“I don’t know what was going on in the market at that time,” Edmonds can be heard saying on the recording played for the jury. “Not spoofing, no manipulation. Like, that’s not what we do.”In federal court on Thursday, the former trader said he didn’t know lying to an FBI agent was a crime and regretted doing so. “I owned up to what I did, it’s what happened and the penalties are the penalties,” Edmonds said.Read More: JPMorgan Gold Desk ‘Spoofing’ Cheated Market, Ex-Trader SaysMeister also brought up comments by Edmonds under oath during a deposition he gave in a lawsuit against JPMorgan, after he’d left the bank. At the time, the former trader told federal authorities he didn’t know why one of his colleagues was fired in 2013. But on Thursday, Edmonds admitted that Nowak had told him in a meeting shortly after the firing that the former colleague had lost his job for spoofing.“You lied to the deposition, you lied to the FBI,” Meister said. “That’s two crimes committed after you left JPMorgan.”Edmonds, who has been on the witness stand since Tuesday, was hired at a salary of about $80,000 in 2008, and was earning about $300,000 annually by 2017, when he left the bank and took a severance buyout of about $157,000.On Friday, During cross-examination by Smith’s attorney, Jonathan Cogan, Edmonds admitted he also lied on his 2017 severance agreement with JPMorgan, which included a requirement that he disclose any violations of the bank’s code of conduct that he was aware of.Edmonds testified that while he signed the document saying there were no violations that he was aware of, “that was a lie.” He added that he has been telling the truth since he agreed to plead guilty and cooperate with prosecutors.Also under scrutiny was Edmonds’s trading record. Between 2009 and 2013 he averaged an annual loss of $39,000, according to data shown to the court, though he began to generate profit towards the end of that period.“Early on in my career, I lost money,” Edmonds said. “That was a learning curve,” and “over time I started to make more money, I started to get better,” he said.The annual profit of JPMorgan’s precious metals desk varied, but it never dipped below $100 million between 2007 and 2018, according to data presented by Meister. In its best year, it made more than double that.The case is US v. Smith et al, 19-cr-00669, US District Court, Northern District of Illinois (Chicago)(Updates with Friday testimony about severance package, agreement.)Most Read from Bloomberg Businessweek©2022 Bloomberg L.P. Continue reading →