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...The “flow” rates into serious delinquency for credit card and auto loans “are still rising above pre-pandemic levels”, said Wilbert van der Klaauw, a research adviser at the New York Fed....
...Typically, these borrowers have missed a single loan payment and are unable to make it up....
...In a “no landing” or moderate soft landing scenario, the Fed is likely to just watch and wait. Now, some people point to what [Fed chair Jay] Powell did in 2019....
...Similarly, the Fed’s overnight reverse repo facility triggered deposit flight as the Fed raised rates. Old rules are revised slowly — Reg Q was introduced in 1933 — disadvantaging banks....
...Over the past two years, big banks such as JPMorgan Chase, Bank of America, Citigroup and Wells Fargo charged more for loans in lockstep with the Fed lifting interest rates, without passing on the increase...
...But those taking out new loans and with hefty credit card balances will be even more strained. Delinquencies are edging up....
...Likewise, for auto loans, people in their 30s are now falling behind on their loans at a faster pace than during the pandemic....
...Fewer new bad loans led to a rise in competition for servicing contracts. Still, collections from existing assets have disappointed....
...Clearly, someone out there thinks new data could force the Fed’s hand in the near future. But by all appearances, this is a comfortable spot for the Fed....
...future Fed rescue....
...But he added it could cut borrowing costs “even more as the further postponement of the first Fed rate cut might offset some easing of financing conditions in the euro area”....
...inflation would reduce the UK government’s overall contribution to zero, based on current projections — although this will probably change as the recent increase in borrowing costs may mean the price of servicing...
...Higher Fed rates are supposed to boost income to lenders and reduce the income of borrowers....
...“During the second world war, US soldiers were fed mutton — could’ve been goat, could’ve been sheep — and they came back saying ‘I ain’t never eating that crap again’”....
...Moreover, many American debtors are paying fixed rates and won’t get hit by hikes until they need to refinance their loans....
...In 2022, new foreign loans to emerging market sovereigns dropped to their lowest level in a decade....
...Low interest rates implied that for any given dollar of debt, periodic servicing costs would be manageable, allowing for incrementally higher leverage....
...Separately, it paid a $25mn penalty to the CFPB related to private student loan servicing practices. “Capital One is a healthy, well-managed, well-capitalised bank....
...Hanig notes that the premium is larger for smaller loans. For half-billion-dollar loans where the likes of Apollo, Ares and KKR bid, he doubts whether there are excess returns to be had....
...The biggest risk to that model is that borrowers don’t pay back their loans, a risk amplified by the fact that banks are highly leveraged....
...Unhedged: Does the logic you just laid out hold for the riskier ends of the credit spectrum, such as in triple-C high-yield bonds or leveraged loans?...
...Intel will get $8.5bn in direct funding and $11bn in loans from the US government to help it expand in high-end chips and compete with the likes of Taiwan’s TSMC and South Korea’s Samsung....
...Kemble needs to refinance a £190mn loan that is due for repayment by the end of April....
...The company has said it plans to keep servicing this debt despite the sovereign restructuring....
...The three major Singaporean financial institutions — DBS, United Overseas Bank and Oversea-Chinese Banking Corporation — refer to Fed rates when setting those for their own loans....
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