Across the Curve

Early FX

Via Kit Juckes at SocGen:

<http://www.sgmarkets.com/r/?id=h10997059,171e6ebf,171e6ec0&p1=136122&p2=3e131b82a3563f1923e746b746786a0f>

A bit of risk aversion overnight and US real yields’ advance has stopped, stopping the DXY rally at the same time. TIIPS still do a good job of helping me understand where the dollar’s going and it’s clear that a rapid rally can’t happen while the reaction to talk of fed tightening is so muted at the longer end of the Treasury market,. So we’re bullish, but not over-excited. Today, we get US durable goods, which we expect to be flat on a headline basis and not too sparkly if we dig further (non-defence ex-air capo goods are likely to be up 0.1%). Jobless claims are due, as are pending home sales, the Kansas fed index and St Louis fed President James Bullard speaks. But with parts of Europe off today, the real focus is now on tomorrow’s speech by Janet Yellen and a marginally softer dollar, correlating with the higher oil price, is the result.

DXY bounce stalls with TIIPS yield

[http://email.sgresearch.com/Content/PublicationPicture/226488/1]

Oil prices are up through USD 50 for WTI, and that combines with the strength of US equities yesterday to keep the commodity currencies supported. AUD is steady despite a soft headline on Capex data. The New Zealand dollar is a little softer after a downbeat milk price forecast from Fonterra, but overall, the commodity and emerging market currencies are quietly stronger today. Copper prices bounced and that marginally reduces the appearance of divergence between metals and oil, but that remains a theme we stick with – shorts in NZD and AUD, rather than CAD, in G10 for example.

Copper/oil divergence – one to watch

[http://email.sgresearch.com/Content/PublicationPicture/226488/2]

In the week to May 20, Japanese investors bought Y684bn in foreign bonds, taking purchases this year to Y11trn, more than twice as much as they had bought in the same period last year. How on earth can I be bearish of a currency whose investors ship money out at that rate (nearly 50% above the run-rate of the current account surplus)? Annual purchases are over Y20trn and if I include buying of foreign equities, and subtract foreign buying of Japanese bonds and equities, the annual total is now running at Y26trn. These figures are worth highlighting not because they tell me where the Yen is going today, but because they show that yen strength is now predicated on a big market long of the currency. That long can grow on risk averse days (and on days like today when there are nerves about the Chinese economy) but I’ll only really push fresh yen longs either at cheaper levels or at least, after positions have been cut back.

Japanese buying of foreign bonds

[http://email.sgresearch.com/Content/PublicationPicture/226488/3]

GBP/USD is bid – yet again. More pre-referendum hedges are being closed than I could imagine possible and GBP/USD is bearing down on the May 3 high at 1.4770, which coincides with the 200-day average. I want to be short of GBP/USD after the vote, on a ‘remain’ bounce or an ‘exit’ fall, but here, everything is about positioning and I suspect ‘Brexit’ hedges are being put on in other FX pairs (buying CHF/NOK at these levels, looking for sideways trading on a ‘remain’ or a sharp rally on a risk-averse ‘leave’ outcome, is attractive, for example).

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Advanced Trade Report

Via Stephen Stanley at Amherst Pierpont Securities:

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FX

Via Marc Chandler at Brown Brothers Harriman:

Dollar Marks Time

• The EU-IMF/Greece deal is more of the same
• There are three highlights of the North American session today:  US trade data, the BOC decision, and DOE oil inventory data  
• Brazil’s Congress passed a bill that allows the government to post a primary budget deficit of -BRL170.5 bln in 2016
• Mexico reports April trade and Q1 current account; Banco de Mexico releases its quarterly inflation report

The dollar is mixed against the majors in consolidative trade.  The Antipodeans and the Norwegian krone are outperforming, while the yen and sterling are underperforming.  EM currencies are mostly firmer.  KRW, INR, and MYR are outperforming while ZAR, TRY, and CNY are underperforming.  MSCI Asia Pacific was up 1.5%, with the Nikkei up 1.6%.  MSCI EM is up 1.6%, with Chinese markets down modestly.  Euro Stoxx 600 is up 1.1% near midday, while S&P futures are pointing to a higher open.  The 10-year UST yield is flat at 1.87%.  Commodity prices are mostly higher, with oil up 1% ahead of DOE inventory data.  Copper is up 0.5%.  

The US dollar is little changed against the major currencies as yesterday’s moves are consolidated and traders wait for fresh developments.  Global equities were higher after Wall Street’s advance yesterday.  Asia Pacific bond yields were firm, following the US lead, but European 10-year benchmark yields are lower, led by the continued rally in Greek bonds after an agreement was struck that will free up a tranche of aid.  

The relatively stable capital markets are itself news.  Last summer and again earlier this year, weakness of the yuan and Chinese equities were a major disruptive force.  Earlier today, the PBOC “fixed” the yuan at its lowest level since March 2011.  The dollar has been trending higher against the yuan steadily even if slowly all month. Today it is at three-month highs.

Chinese equities were the only Asian market to weaken today.  The MSCI Asia-Pacific Index advanced 1.5% today off seven-week lows seen earlier in the week.  The HK China Enterprise Index was up 2.7%.  China’s markets were off 0.25% today, and year-to-date off 20-22%  

Yesterday, the Wall Street Journal thought it was news that China is not letting market forces drive the yuan.  We have long discussed the gap between China’s declaratory policy and its operational policy.  Today, Bloomberg reports that the Chinese delegation to the upcoming Strategic and Economic Dialogue talks (June 6-7) is keenly interested in whether the Fed hikes in June or July.  

The report claims China would prefer July.  Can it really make that much of a difference?  Is this a topic for a strategic discussion?  Even though the Federal Reserve may practice a type of democratic centralism that is familiar in China, can Yellen (Fed chair often attends the talks) commit one way or the other, and even if she could, would she (or the US) want to?  

Moody’s downgraded Germany’s largest bank to start the week, and now the CEO of Italy’s largest bank has stepped down, clearing the way apparently for a capital campaign.  The Dow Jones Stoxx 600 is up 1.1% as the financials continue to outperform (+1.6%).  The news stream in Europe has been mostly limited to the German May IFO, which was better than expected, and the Italian industrial sales and orders were weak.  

The EU-IMF/Greece deal is more of the same.  Over the weekend, the Greek parliament approved numerous measures that tightened fiscal policy.  It also adopted a contingency plan if it had not met its fiscal targets in 2018.  The EU agreed to free up 10.3 bln euros so that Greece can service its debt, chiefly in official hands.  

There has been tension between the EU and IMF over the sustainability of Greece debt.  The IMF had called for “unconditional” relief.  Germany appeared the most adamant:  No.  This seemed to be both a principled position as well as a political consideration ahead of next year’s election.  The IMF capitulated.  Rather than debt relief up front, the IMF has agreed to give its blessings to debt relief after the completion of the current program in 2018.    

There had been reports that the many of the non-European members of the IMF had been critical of the multilateral lender’s exposure to Greece.  The major concession made today does not address that criticism.  However, a new battle likely will be fought as later this year the IMF will conduct a new debt sustainability analysis and assess before committing new funds.  

There are three highlights of the North American session today.  First, the US advance merchandise trade report for April (expected to widen to $60 bln from $56.9 bln) will be plugged into Q2 GDP models.  

Second, the Bank of Canada will announce the decision of its monetary policy meeting.  There will be no change in rates, but the accompanying statement will be quickly scrutinized for bias.  The economy appears to have lost some momentum, and the Alberta fires won’t help.  At the same time, the apparent recovery in the US after a six-month soft patch is welcome news for Canada.  The recovery in oil prices is also a favorable development for Canada.  Also, since the last meeting, the Canadian dollar’s four-month 14% rally ended, and it has pulled back almost 5% this month.  

The third development is the oil market itself, or more to the point, the inventory data.  Late yesterday, API estimated that oil inventories fell 5.1 mln barrels last week.  This helped lift prices to seven-month highs.  The EIA’s estimate is regarded as more reliable.  The median was expecting a 1.6 mln barrel draw down before the API’s estimate.  A larger liquidation of inventories could see the price above $50 a barrel for the first time since last October.  

Brazil’s Congress passed a bill that allows the government to post a primary budget deficit of -BRL170.5 bln in 2016.  The Rousseff government had proposed a primary surplus.  Both the Senate and lower house voted after a joint session that ran well past midnight last night.  The vote counts were not made public yet.  Chalk this up as a small victory.  Passing the actual austerity measures needed to narrow this deficit will be the hard part.  We believe the days of BRL outperformance are behind us as markets come to grips with hard realities that Brazil is facing.

Mexico reports April trade and Q1 current account data.  Banco de Mexico also releases its quarterly inflation report today.  Last week, it cut its 2016 growth forecast range to 2.2-3.2% from 2.6-3.6% previously.  Mid-May CPI came in lower than expected, up 2.53% y/y vs. 2.67% median forecast.  Despite a nearly 7% drop in the peso this month, inflation pass-through has yet to be seen.  There is an ongoing debate about possible Banxico intervention and rate hikes in response to the weak peso, but we just don’t see a clear-cut case for imminent action.  

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Some Corporate Bond Stuff

Via Bloomberg:

IG CREDIT: Volume Higher as CVX, HSBC 10Y Issues Led Trading
2016-05-25 10:16:52.176 GMT

By Robert Elson
(Bloomberg) — Secondary IG trading ended with a Trace
count of $16.8b vs $13.2b Monday, $15b the previous Tuesday. 10-
DMA $14.8b; 10-Tuesday moving avg $18b.

* 144a trading added $3.3b of IG volume vs $2.8b Monday, $2b
last Tuesday

* These topped the most active list:
* CVX 2.954% 2026 was 1st with client selling near twice
buying
* HSBC 3.90% 2026 was next with client and affiliate flows
accounting for 89% of volume
* AZN 5.90% 2017 was 3rd with trades between dealers
taking 67% of volume
* DELL 5.45% 2023 was most active 144a issue; client and
affiliate flows took 94% of volume

* Bloomberg US IG Corporate Bond Index OAS at 156.3 vs 156.7
* 2016 high/low: 220.8, a new wide since Jan. 2012/150.8
* 2015 high/low: 182.1/129.6
* 2014 high/low: 144.7/102.3

* BofAML IG Master Index at +155 vs +156
* 2016 high/low: +221, the widest level since June
2012/+152
* 2015 high/low: +180/+129
* 2014 high/low: +151/+106, tightest spread since July
2007

* Standard & Poor’s Global Fixed Income Research IG Index at
+203, unchanged
* +262, the new wide going back to 2013, was seen
2/11/2016
* The widest spread recorded was +578 in Dec. 2008

* S&P HY spread at +649 vs +653; +947 seen Feb. 11 was the
widest spread since Oct. 2011
* All time wide was +1,754 in Dec. 2008

* Markit CDX.IG.26 5Y Index at 79.6 vs 83.5
* 73.0, its lowest level since August, was seen April 20
* 124.7, a new wide since June 2012 was seen Feb. 11
* 2014 high/low was 76.1/55.0, the low for 2014 and the
lowest level since Oct 2007

* Current market levels
* 2Y 0.922%
* 10Y 1.873%
* Dow futures +73
* Oil $49.10
* ¥en 110.16

* IG issuance totaled $6.05b Tuesday vs $10.6b Monday with the
longest list of issuers YTD
* Note: subscribe bar in upper left corner
* IG BONDWRAP: Last Week’s Recap and Issuance Stats
* May now stands at $167b, the 3rd month this year to top
$160b
* YTD IG issuance now $760b; YTD sans SSA $626.5b

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Auto and Mortgage Delinquencies Climb in Troubled Oil Patch

Via the WSJ:
By Josh Zumbrun
Updated May 24, 2016 5:19 p.m. ET

The year-and-a-half-long spell of low oil prices is making it hard for households to pay the bills in energy-producing regions, an ominous localized trend that comes as the rest of the country returns to pre-recession levels of health.

Delinquencies on auto loans have spiked in the U.S. counties that had the highest employment in the oil-and-gas industry, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit. Mortgage delinquencies have also climbed, though not as dramatically.

Tuesday’s report underscores that although the decline in oil prices has saved many Americans money at the pump, it has caused significant economic fallout for those who were working in the energy industry during the boom.

So far, the increase in delinquencies and deterioration of credit appears to be concentrated only within energy regions of the country.

“These energy counties are 1.7% of total employment, which is small in the national picture,” said Andrew Haughwout, a New York Fed economist who co-wrote the research. “But this report is evidence of real hardship in these counties.”

The national picture remains one of gradual credit improvement. Overall credit increased by $136 billion, to $12.25 trillion, in the first quarter of 2016, driven by an increase of $120 billion in mortgage debt. The amount of debt remains much lower than the peak in 2008, when the housing crisis and recession racked household balance sheets.

Delinquency rates declined nationally—the share of people more than 90 days behind on their mortgage fell to the lowest since 2007. The share of all household debt that is delinquent declined to 3.6% in the first quarter, also the lowest since 2007.

The amount of student loans rose by $29 billion, to $1.26 trillion. The delinquency rate on student loans improved slightly in the first quarter, but remains far higher than all other types of debt. About 11% of student-loan balances are delinquent, compared to 3.6% for loan balances overall and just 2.1% of mortgages. The figures do not include student loan balances that are in grace periods and forbearance, and the New York Fed says student loan delinquencies may be about twice as high for loans that are actually in repayment.

The New York Fed’s report is drawn from a random sample of Equifax credit reports and provides a snapshot of U.S. consumer debt—showing a comprehensive picture of how much Americans have borrowed, and whether they’re on top of their payments.

As a supplement to this quarter’s report, the New York Fed took stock of the fallout from the decline in oil prices, by comparing oil counties to the rest of the country. It defined oil counties as those in which at least 6% of employees worked in the oil and gas industry at the end of 2014—about 10% of all counties.

Throughout the 2007-09 recession and until 2014, energy counties had been a source of strength in the national credit picture. Residents of such counties had somewhat lower rates of delinquency on auto loans and much lower delinquencies on mortgages. That reflected both the better jobs picture in energy regions and the fact that home prices didn’t go through as large a boom and bust as in other regions.

In the past year and a half, this pattern has reversed. Auto delinquencies have held steady at about 3% nationally. In oil counties they have climbed to about 5%. That’s roughly equivalent to the auto-delinquency rate in the immediate aftermath of the recession.

Similarly, mortgage-delinquency rates in oil counties have climbed slightly over the past year, while they have continued to decline in the rest of the country.

Employment in mining and logging, the broad category that includes much oil-and-gas activity, has declined from over 900,000 in late 2014 to about 700,000 last month, a decline of over 20%. This appears too small to drag down the entire U.S. economy, which has about 144 million payroll employees.

But the fallout in the 10% of counties that relied heavily on energy could be significant. The credit delinquencies could disproportionately affect community banks in those regions of the country, and local businesses will likely see fewer customers.

“There’s pockets of recession out there and oil and gas is definitely causing one of them,” said Jason Schenker, president of Austin, Texas-based Prestige Economics.

The rise in delinquencies, though concentrated in oil regions for now, could spread to auto lending more generally, he said, potentially harming the health of both auto manufacturers and financial institutions that provide the loans.

“Autos could be vulnerable. Finance could be vulnerable, too,” Mr. Schenker said.

Write to Josh Zumbrun at [email protected]

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Credit Pipeline

Via Bloomberg:

IG CREDIT PIPELINE: 4 Set to Price, WBA Expected As Well
2016-05-25 09:50:20.341 GMT

By Robert Elson
(Bloomberg) — Set to price today:

* Province of British Columbia (BRCOL) Aaa/AAA, to price at
least $500m 10Y, via managers BMO/HSBC/NBC/RBC; IPT MS
+Low-60s
* Inter-American Development Bank (IADB) Aaa/AAA, to price
$bench Global 10Y, via BNP/C/TD; guidance MS +39 area
* Landwirtschaftliche Rentenbank (RENTEN) Aaa/AAA, to price
$500m 144a/Reg-S 5Y FRN, via Barc/DB/HSBC; IPT 3ML +25 area
* The State of Qatar (QATAR) Aa2/AA, to price $bench 144a/Reg-
S 3-part deal, via al
Khaliji/Barc/BAML/DB/HSBC/JPM/Miz/MUFG/QNB/SMBC
* 5Y, IPT +140 area
* 10Y, IPT +170 area
* 30Y, IPT +230 area

LATEST UPDATES

* Walreens Boots Alliance (WBA) Baa2/BBB, has asked
BofAML/HSBC/UBS to arrange investor calls May 23-24.
* ~$17.2b Rite-Aid buy
* $7.8b bridge, $5b TL, debt shelf (Jan. 7)
* Santander Holdings USA files for FRN
* Reinsurance Group of America (RGA) Baa1/A-; investor
meetings May 23-25
* Bayer (BAYNGR) A3/A-, expected to make all-cash offer for
Monsanto (MON) A3/BBB+, as soon as today; $62b offer would
be largest in German history
* Tesla Motors (TSLA); automatic debt, common stk shelf
* Debt may convert to common stk
* Discovery Communications (DISCA) Baa3/BBB-; may revisit bond
market this yr, BI says
* Apple (AAPL) Aa1/AA+, may return to market
* It priced $12b in 9 parts Feb. 16
* Re-opened 3 of the above issues for $3.5b March 17
* Merck & Co (MRK) A1/AA; has not priced a new issue since
Feb. 2015, has $1.5b maturing May 18
* General Electric Company (GE) A3/AA-, has yet to issue YTD;
parent GE Co has $11.1b maturing this year, including $2.3b
this week

MANDATES/MEETINGS

M&A-RELATED

* Abbott (ABT) A2/A+; ~$5.7b St. Jude buy, ~$3.1b Alere buy
* $17.2b bridge loan commitment (April 28)
* Air Liquide (AIFP) –/A+; ~$13.4b Airgas buy
* $10.7b financing incl bonds, EU3b-3.5b equity (April 26)
* Sherwin-Williams (SHW) A2/A; ~$9.3b Valspar buy
* $8.3b debt financing expected (March 20)
* Nasdaq (NDAQ) Baa3/BBB; Marketwired buy
* $1.1b bridge (March 10)
* Mylan (MYL) Baa3/BBB-; ~$9.9b Meda buy
* $10.05b bridge (Feb 17)
* Dominion (D) Baa2/A-; ~$4.4b Questar buy
* $1.5b issuance expected to fund deal (Feb 1)
* Shire (SHPLN) Baa3/BBB-; ~$32b Baxalta buy
* $18b loan to be refinanced via debt issuance (Jan 18)
* Molson Coors (TAP) Baa2/BBB-; ~$12b MillerCoors buy
* $9.3b bridge (Dec 17)
* Teva (TEVA) Baa1/BBB+; ~$40.5b Allergan generics buy
* $22b bridge; $5b TL commitment (Nov 18)
* Duke Energy (DUK) A3/A-; $4.9b Piedmont Natural buy
* $4.9b bridge (Nov 4)
* Aetna (AET) Baa1/A; ~$28.9b Humana buy
* $13b bridge (August 28)
* Anthem (ANTM) Baa2/A-; ~$50.4b Cigna buy
* $26.5b bridge (July 27)

SHELF FILINGS

* Reynolds American (RAI) Baa3/BBB filed automatic debt shelf;
sold $9b last June (May 13)
* Statoil (STLNO) Aa3/A+, files debt shelf; last issued USD
Nov. 2014 (May 9)
* Corporate Office (OFC) Baa3/BBB-; debt shelf (April 12)
* Rogers (RCICN) Baa1/BBB+; $4b debt shelf (March 4)

OTHER

* Ford Motor Credit (F) Baa2/BBB; may have ~$7b issuance this
yr (May 10)
* Wal-Mart (WMT) Aa2/AA; 2 maturities in April (April 1)
* GE (GE) A1/AA+; $25b debt possible for M&A, buybacks (Jan
29)

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Tough Times Continue for DeutschBank

Via Bloomberg:
May 24, 2016 — 7:00 PM EDT
Updated on May 25, 2016 — 2:15 AM EDT

After topping Euromoney ranking for 9 years, lender slips to 4
Bank’s market share shrinks to 7.9%, from 14.5% a year earlier

A tough week for Deutsche Bank AG just got worse.

The German lender’s share of the $5.3 trillion-a-day currency market tumbled to 7.9 percent, down from 14.5 percent a year earlier, according to a Euromoney Institutional Investor Plc survey. The bank is the world’s fourth-largest currency trader by market share, sliding from second place in Euromoney’s 2015 ranking after holding the top position from 2005 to 2013.

That’s the second blow for Deutsche Bank in as many days, after Moody’s Investors Service on Monday cut the lender’s credit rating to two grades above junk. The bank is axing jobs, pulling out of countries and dropping clients as it looks to return to profit. Net revenue from the bank’s debt sales and trading team, which includes foreign exchange, slumped 29 percent in the first quarter from a year earlier, the bank reported last month.

“The overall result reflects a well-flagged shift in the bank strategy that has seen us focus on delivering a better quality of service to a smaller number of clients,” Fabio Madar, global head of foreign-exchange sales in London at Deutsche Bank, said via a spokesman. “We remain committed to maintaining our world-class global foreign-exchange business and we’re making significant investments to further strengthen our electronic and derivatives offering.”

Deutsche Bank fell to fifth place from second in Euromoney’s evaluation of the spot and forward market while it retained the lead in options trading.

“Deutsche Bank has been particularly hard-hit by all the restructuring and the revamps,” said Paul Gulberg, a banking analyst in New York at Portales Partners LLC. “It’s challenging for all the European banks. You have negative interest rates in Europe, which isn’t helping the trading environment at all.”

Citigroup Inc. topped Euromoney’s rankings with a 12.9 percent market share, followed by JPMorgan Chase & Co. and UBS Group AG. Barclays Plc slipped three spots to sixth, the survey shows.

Banks have struggled to offset low interest rates and market volatility that have together pushed investors away from the currency markets, sapping revenue. Volumes fell 23 percent from last year, with the top five banks’ share of the market plummeting to an all-time low, Euromoney said. Banks are losing businesses to non-bank liquidity providers, with XTX Markets, a London-based electronic market maker, ranking 9th in the survey in its debut.

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Gundlach Thinks Stock Market is Dead Money

Via Reuters and hat tip to Steve Feiss at Government perspectives for pointing this one out:

Jeffrey Gundlach, the chief executive officer of DoubleLine Capital, said on Tuesday that the rally in U.S. stocks, which began on Monday, feels like a short squeeze and characterized U.S. stocks as “dead money.”

“The market is not incredibly healthy,” Gundlach said in a telephone interview, noting recent corporate earnings have come in weak. Gundlach, who oversees $95 billion at Los Angeles-based DoubleLine, said the S&P 500 index .SPX “has gone nowhere in the past 12 months to 18 months.”

On the Federal Reserve, Gundlach said it is still 50/50 odds that the U.S. central bank will raise interest rates in June. He said many Fed officials are “dying to raise rates,” but that it is Fed chair Janet Yellen’s opinion that matters the most.

“All that matters is Yellen. She is still there. I feel like we are back in December again, where everyone thinks that there is a super secret that some Fed officials have this knowledge that the economy is really good.”

Last week, New York Federal Reserve President William Dudley said the U.S. economy could be strong enough to warrant an interest rate increase in June or July, reinforcing the drum beat from within the Fed in recent days that rate increases are coming soon. A range of policymakers with normally varying views on monetary policy are now stating a rate increase is possible at the next policy meeting in June.

Gundlach has been known for his prescient investment calls. Last year, Gundlach correctly predicted that oil prices would plunge, junk bonds would live up to their name and China’s slowing economy would pressure emerging markets. In 2014, Gundlach correctly also forecast U.S. Treasury yields would fall, not rise as many others had expected.

(Reporting by Jennifer Ablan; Editing by Chris Reese)

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Greek Tragedy Continues

Via the WSJ:
By Viktoria Dendrinou and
Gabriele Steinhauser
May 24, 2016 8:59 p.m. ET

BRUSSELS—Eurozone finance ministers and the International Monetary Fund patched together a deal in the early hours of Wednesday that clears the way for fresh loans for Greece and sets out how the country could get debt relief in the future.

The ministers, who held an 11-hour meeting in Brussels, said Greece had done what was necessary to unlock the next slice of financial aid, concluding a review of its bailout that was delayed for months. The new payouts will save Greece from defaulting on big debt redemptions to the IMF and European Central Bank in July.

“On the package of reforms Greece had committed to last summer, we now have full agreement,” said Jeroen Dijsselbloem, the Dutch finance minister who presided over the meeting of finance ministers.

Once all 19 eurozone countries have formally signed off on the new deal, Greece will get €10.3 billion ($11.48 billion) in fresh loans, starting with a €7.5 billion installment in the second half of June.

The ministers also agreed on a road map to ease Greece’s mountain of debt, moving to end a long-standing standoff with the IMF over the type and scale of relief Athens needs.

“It is an important moment for Greece after so much time,” said Greek Finance Minister Euclid Tsakalotos.

Wednesday’s deal required all key parties in the negotiations to let go of some of their demands and go further on other elements than they had said was possible: Greece had to adopt more austerity than it had signed up for last summer; Germany had to promise more measures to ease Greece’s payment burden; and the IMF had to accept that the most important debt-relief measures wouldn’t be enacted until at least 2018, when Greece’s current bailout deal ends.

Among the steps that will be considered in 2018 are caps and deferrals on interest rates as well as the return to Athens of profits from Greek government bonds held by eurozone central banks, Mr. Dijsselbloem said. The eurozone may also use leftover funds from its own bailout to repay earlier other official loans, for instance from the IMF.

“This is stretching what I thought would have been possible not so long ago,” Mr. Dijsselbloem said.

Postponement of these steps had been a key condition by Germany and other eurozone hawks, which are reluctant to debate Greek debt relief in their parliaments at the moment. Crucially, the deal delays a vote on debt relief in Germany’s Bundestag until after general elections in 2017.

Mr. Dijsselbloem said the agreement on debt relief, along with a promise to look at further action if necessary, should be enough to bring the IMF back on board by the end of the year. But a few obstacles remain until Greece can actually expect fresh money from the Washington-based fund.

Poul Thomsen, the director of the IMF’s European department, said the deal shows that the eurozone is willing to consider the kind of measures needed to make Greece’s debt sustainable. However, he stressed that the fund would only provide more loans once it has assessed the actual impact of the promised moves.

“There are some measures that still need to be calibrated,” he said.

Mr. Thomsen said that the fund had made “a major concession” in allowing the majority of the debt relief to be implemented only years from now.

“We have shown flexibility,” he said.

The IMF, which has co-financed Greece’s first two bailouts, had so far declined to contribute to the third loan package—agreed upon in August—claiming that the country’s debt is too high to ever be paid off.

During the late-night talks, ministers went through several drafts of their decisions, discarding earlier versions that were deemed too weak. Much of the actual negotiation happened in meetings between German Finance Minister Wolfgang Schäuble, the IMF’s Mr. Thomsen and Mr. Dijsselbloem, while the other ministers waited in a separate room, according to officials familiar with the talks.

At one point, progress was delayed because Mr. Thomsen couldn’t reach IMF Managing Director Christine Lagarde, who was at a conference in Kazakhstan, the officials said.

“It was a complicated birth tonight. It’s probably about as good as it gets,” Slovakia’s finance minister, Peter Kazimir, said in a tweet.

The deal comes two days after Greek lawmakers approved new taxes and austerity measures demanded by its creditors. That package also included a mechanism that will force some €3.6 billion in automatic spending cuts should the government fail to meet budget targets.

Greece’s Mr. Tsakalotos said the deal finally gave his country some light at the end of the tunnel.

“This can be the beginning of turning Greece’s vicious cycle of recession into one where investors have a clear runway to invest in Greece,” he said.

Write to Viktoria Dendrinou at [email protected] and Gabriele Steinhauser at [email protected]

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ECB Corporate Bond Purchases

Via Reuters:

BFW 05/25 09:44 *ECB CORP BONDS PURCHASES SAID TO START SLOWLY IN JUNE: REUTERS
BFW 05/25 09:42 *ECB SAID AIMING TO BUY EU5B-EU10B/MO OF CORP. BONDS: RTRS

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