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...Interest rates in many advanced economies are now at their highest levels since the turn of the millennium, but the US Federal Reserve, the European Central Bank and the Bank of England are all expected...
...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....
...While we agree that debt levels are worrying, particularly given persistently higher rates, we do not think debt servicing is a particular cause for concern....
...Meanwhile, the external debt-servicing costs for poor countries, relative to revenue, have almost tripled in the past decade, leaving 48 nations at or near debt distress....
...Higher interest rates will also add to predicted debt servicing costs....
...Need to know: Global economy High interest rates and record debt levels risk ramping up debt servicing costs among some of the world’s poorest nations to “crisis” levels, according to the World Bank....
...In August, the Federal Reserve Bank of New York’s annual report on the finances of American households showed that US credit card balances breached $1tn for the first time in the second quarter of the year...
...The US, which has the highest central bank rate in the G7 and a low revenue base compared with its higher-tax peers, is on course for a dramatic surge in debt servicing costs....
...That means debt servicing costs will soon explode; indeed, they are already doing so, prompting chatter about bond “vigilantes”....
...Wednesday’s fall was the biggest daily decline since the collapse of Silicon Valley Bank in March, following what investors saw as dovish remarks by US Federal Reserve chair Jay Powell....
...[MUSIC PLAYING] US federal regulators have a new target, and it’s Big Tech’s bromance with artificial intelligence....
...If 18 months of rising interest rates from the Federal Reserve were supposed to put a chill on the world’s biggest economy, US consumers had another idea....
...Central banks’ aggressive tightening is slowly beginning to weigh on indebted companies through higher debt servicing costs — a trend that prompted the Bank of England to warn in August of an approaching...
...He adds that the US Federal Reserve has had success in taming wage inflation, which is proving to be a new tailwind for profit margins....
...“Fiscal laxity” has kept markets afloat and shielded the US economy from harm despite the Federal Reserve’s punishing interest rates this year, he says....
...America now faces rising and increasingly expensive federal budget deficits in a climate of high interest rates, which means debt servicing will eat up a growing share of the public outlay....
...O’Hanley argued that investors’ concerns about net interest income should settle down if the US Federal Reserve finishes raising interest rates and, as he expects, holds them steady for a while....
...The problem was that the money had been spent to support the country’s often cash-strapped states and to plug federal government revenue shortfalls....
...Fiscal largesse drove much of recent growth, and the impact of the surging debt stock will weigh on future growth through the costs of servicing it....
...It also breaks a golden streak for US banks. In 2022 and 2021 no Federal Deposit Insurance Corporation backed bank failed — an unusually long period....
...And central banks remain in tightening mode — the ECB is widely expected to follow the US Federal Reserve’s lead and raise rates by a quarter point today, as is the Bank of England next week....
...More than 4,000 lenders provided home loans in the US last year, 60 per cent of which were made by independent mortgage companies, not banks....
...As for Silicon Valley Bank itself, a buyer may yet appear. Its role servicing the tech sector is valuable....
...This week, US federal prosecutors charged two in connection with operating the service: Roman Storm and Roman Semenov....
...World Bank members have agreed to leverage the bank’s balance sheet more effectively to lend more funds....
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