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Small investment funds buy Venezuela bonds to pressure Maduro and Guaido By Reuters

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© Reuters. FILE PHOTO: FILE PHOTO: Venezuela’s President Maduro addresses the General Assembly in New York

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By Corina Pons, Luc Cohen and Mayela Armas

CARACAS (Reuters) – Three small investment funds have started buying defaulted Venezuelan bonds as hopes of a change of government are fading and the South American nation is proposing a restructuring, according to sources and documents.

Canaima Capital Management, headquartered on the English Channel island of Guernsey, Uruguay-based Copernico and Cayman Islands-based Altana have bought heavily discounted bonds with face value of hundreds of millions of dollars, according to eight finance industry sources in Caracas, New York, Miami, Madrid and London.

The funds appear to be part of a small group of contrarian investors bucking the broader market consensus, which maintains there is little value in Venezuelan bonds that have not been serviced in nearly three years amid an economic crisis.

The funds believe it is time to act and to evaluate legal options instead of waiting for a friendly negotiation with allies of Juan Guaido, who is recognized by more than 50 countries as Venezuela’s interim president, even though he still hasn’t taken power.

The funds argue investors may be unable to recover missed interest payment after 2020 due to a statute of limitations clause in the bonds’ covenants – an assertion flatly denied by the main committee for Venezuela creditors.

Nonetheless, the efforts to amplify these concerns has fueled nervousness and increased the willingness of bondholders to sell their notes, according to four Venezuelan finance industry sources.

Altana, which two sources said was offering to buy bonds this year, has already taken legal action against Venezuela to try to force payment. In an Oct. 8 complaint filed with the United States District Court for the Southern District of New York, the fund demanded payment from Venezuela on $108 million of defaulted bonds.

That came after investment funds Casa Express and Pharo Gaia (NASDAQ:) Fund in late September won a $400 million summary judgment on defaulted Venezuelan bonds in U.S. courts, a setback for Guaido’s team that could prompt more bondholders to seek judgments rather than waiting for a negotiation.

“If the only way to stop the statute of limitations is to sue, we have to sue, unless we reach some kind of agreement,” said Celestino Amore, managing director of London-based firm IlliquidX, which is working with Canaima Capital Management.

He added that emerging market investors are particularly attuned to prescription clauses after they were invoked on some Argentine bonds in 2015.

Luke Allen, an independent non-executive director of Canaima, said in a statement that the company “was pleased to have joined forces with IlliquidX” and that the firm was “focusing on launching our dedicated Venezuelan sovereign debt opportunity vehicle.”

It was not immediately evident how much assets Canaima has under management.

Copernico, which according to its pitch document has $600 million in assets under management, has accumulated Venezuelan bonds with a face value of between $100 million and $500 million, according to three people familiar with the matter.

Copernico did not respond to requests for comment.

U.S. sanctions prohibit American individuals and funds from buying Venezuelan securities, but such rules do not appear to apply to Copernico, Canaima and Altanta because they are based outside of the United States.

‘BOLD MOVE’

Bonds issued by Venezuela’s government trade near 7% of face value while those issued by state oil company PDVSA fetch around 3%, according to Refinitiv Eikon data.

The bonds do not generate income because Maduro’s government stopped servicing them in 2017.

Copernico and Canaima argue that investors are approaching a three-year statute of limitations on lawsuits against Venezuela and PDVSA, per bond covenants.

Finance Minister Delcy Rodriguez repeated this argument in a September call for investors to negotiate a restructuring, a call that was largely ignored because U.S. sanctions prohibit dealings with members Maduro’s government.

Venezuela’s finance ministry said in a Monday statement that bondholders had until Nov. 13 to respond to the offer, an extension of 30 days from the prior deadline.

The Venezuelan Creditors Committee, which groups U.S. investors, has repeatedly said the prescription clause is only triggered once Venezuela and PDVSA transfer interest or principal payments to the financial institutions charged with distributing them to investors.

Because this in most cases has not happened since 2017, most bondholders believe the clause is irrelevant. In a statement this month, the committee reiterated “its willingness to work towards an amicable restructuring.”

Guaido’s special prosecutor this month also said that the prescription clause has not been activated.

But not all funds have been calmed by those statements. Discussions of the statute of limitations issue has encouraged some nervous bondholders to unload their notes.

“It was a bold move, one that favors these funds,” said a financial adviser in Caracas familiar with the case, referring to Rodriguez’ reference to the prescription clause.





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Fed’s Bostic says significant portions of U.S. recovery are weak or nonexistent By Reuters

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(Reuters) – It will be a while before the U.S. economy is fully recovered and before the Federal Reserve will raise interest rates or remove the support it is providing financial markets, Atlanta Federal Reserve Bank President Raphael Bostic said on Monday.

“On balance, I am comfortable with our current policy stance,” Bostic said in remarks prepared for a virtual event organized for the Securities Industry and Financial Markets Association Annual Meeting. “As I have detailed today, though the U.S. economy continues to show clear signs of recovery, there remain significant portions where the recovery has been weak or nonexistent.”

The Fed moved quickly to support the economy in March by slashing rates to zero and launching emergency lending programs to support market functioning. Those programs will stay in place as long as needed, however, market participants should expect the central bank to sunset some of its emergency lending vehicles after the crisis has passed, Bostic said.

The economic crisis caused by the coronavirus pandemic caused the most pain for Black and Hispanic workers, who were disproportionately affected by job losses, Bostic said. Many of the jobs lost may not return, particularly in travel and food services, as companies adjust to lower demand or use technology to replace workers, he said.

Leaders in economics and finance need to openly acknowledge gender, racial and other disparities and support policies that can help close those gaps, he said. For the Fed, that includes supporting the labor market recovery to minimize the risks of long-term damage, Bostic said.

“Indeed, an unnecessarily slow labor market rebound could just drive historic wedges deeper, continuing to exacerbate the geographic, racial, gender, and income disparities in our economy,” Bostic said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Tolerating higher inflation ‘worth it’ to help achieve employment goals By Reuters

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© Reuters. Outbreak of coronavirus disease (COVID-19) in New York

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(Reuters) – Black and Hispanic workers and others in low-wage jobs were just beginning to see their job situation improve before the pandemic hit, wiping out many of those gains, Philadelphia Federal Reserve Bank President Patrick Harker said on Monday.

The Fed’s new framework should help to address shortfalls in employment, helping affected workers find new opportunities, Harker said.

“No longer will we head off higher inflation by preemptively raising interest rates before we have achieved full employment,” Harker said in remarks prepared for a virtual event organized for the HOPE Global Forum. “Tolerating the risk of slightly higher inflation, in our view, is worth it if it helps us achieve our employment goals.”

Job placement programs can also help people without college degrees move into better-paying roles with more opportunity for growth, Harker said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Pandemic expected to push poorer Americans out of banking system: regulator By Reuters

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© Reuters. FILE PHOTO: Hundreds of people line up outside a Kentucky Career Center hoping to find assistance with their unemployment claim in Frankfort

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By Pete Schroeder

WASHINGTON (Reuters) – Many poorer Americans will struggle to keep a foothold in the banking system due to economic fallout from the coronavirus pandemic after years of increasing access, a U.S. banking regulator said on Monday.

A new report from the Federal Deposit Insurance Corporation (FDIC) found that in 2019 just 5.4% of Americans lacked a checking or savings account, the lowest level recorded by the decade-old survey.

But the watchdog warned that economic havoc wrought by the pandemic could push many struggling Americans, who were already hovering at the fringes, out of the traditional banking system altogether.

“The COVID-19 pandemic is likely to contribute to a rise in the rate of unbanked households,” the FDIC said in its report, noting that banking access usually tracks the broader health of the economy.

The 2019 record low came after years of steady economic gains, and the previous high for unbanked households was in 2011, amid the previous recession. The most frequently cited reason for not having a bank account is insufficient funds to meet account minimums.

The regulator said it could not predict how many people would lose access to bank accounts or be otherwise financially harmed as a result of the pandemic, but flagged some concerning vulnerabilities: In 2019, 35.8% of households reported not saving for unexpected expenses or emergencies. Among unbanked populations, 74% were not able to build up emergency savings.

Complaints to the Consumer Financial Protection Bureau between March and July suggest many Americans are already being pushed to the edge of the financial system by the pandemic.

Between March and April, reports flagging problems such as impaired credit, foreclosure threats and aggressive debt collection tactics, jumped 50% on the year-ago period, according to an analysis by U.S. PIRG and the Frontier Group.

Furthermore, the FDIC found banking activities more commonly relied-upon by rural populations and people with volatile incomes, such as cash transactions and branch visits, had been hindered by lockdowns and vendors limiting the use of bills.

Having a bank account is a critical foothold to building wealth. Those without accounts pay significantly more for basic services, such as cashing checks and making payments – a problem far more likely to affect minority groups. Around 14% and 12% of Black and Hispanic households respectively were unbanked, compared with 3% for whites.

“Millions of Americans – and families of color in particular – remain outside the mainstream banking system and are missing the economic opportunities that come from having a bank account,” said Rob Nichols, CEO of the American Bankers Association, which on Monday launched an initiative to boost the provision of simple low-cost bank accounts.

The 2019 survey found, however, that rapid adoption of new technology is expanding access to financial services. Mobile banking more than doubled as the primary means of accessing a bank account from 2017, and 31% of households reported using a person-to-person payment service like PayPal or Venmo.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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