Headlines

Italy’s troubled banks may suffer an additional 10 billion euros ($11 billion) in losses from the sale of their bad loans at current market prices, said Ignazio Visco, Bank of Italy governor and ECB governing council member. “If they were sold at the very low prices offered by the few large specialist debt collection agencies active in the market today, which pursue very high returns, the amount of additional writedowns would be in the order of 10 billion euros,” Visco said on Wednesday at the central bank’s annual meeting in Rome, Bloomberg News reported.

Brasil Distressed, the troubled-asset buyer also known as BrD, shuffled its partnership and said it plans to step up purchases this year, Bloomberg News reported. BrD aims to invest in as much as 1.5 billion reais ($460 million) in soured debt from mid-size Brazilian companies, two-thirds more than it bought last year, Carlos Catraio, a managing partner, said in an interview. The firm has purchased about 3 billion reais in debt since it was created in 2010.

U.K. mortgage approvals fell to a seven-month low in a sign the housing market is slowing, though Britons are continuing to take advantage of low interest rates to take on unsecured debt, Bloomberg News reported. Lenders approved 64,645 home loans in April, the fewest since September and below the median forecast in a Bloomberg survey. Mortgage lending grew 2.7 billion pounds ($3.5 billion), the least since April 2016, the figures from the Bank of England show.

One of the European Central Bank’s most senior officials has called for Greece’s creditors to provide more detail on the debt relief they will provide the country if the ECB is to include Athens in its stimulus programme, the Financial Times reported. Benoit Coeure said the ECB needed more clarity on the sustainability of the country’s debt pile – currently at 180 per cent of GDP – before making a decision on whether it could be included in its quantitative easing. Talks between the EU and IMF on the debt relief to be afforded to Greece broke down at a meeting earlier this month.

Shares in Reliance Communications are down again in the wake of the telco’s credit rating being downgraded. On Tuesday, Moody’s Investors Services cut RCom’s corporate rating to Caa1, indicating high credit risk, the Financial Times reported. That followed a move by Care Ratings, India’s second-largest rating agency, cutting all types of the company’s debt to “default”, the lowest level. The downgrades come hot on the heels of a media report that RCom had missed interest repayments to more than 10 Indian banks.

Italian government debt is under-performing its eurozone rivals this morning as investors hone in on the prospect of earlier than expected elections in the bloc’s third largest economy, the Financial Times reported. Italy’s 10-year debt yield, a measure of the government’s borrowing costs, has gained over 2 basis points (0.02 percentage points) this morning to hit 2.2 per cent – a two week high – after former PM Matteo Renzi raised the prospect of an autumn vote. Yields fall when prices rise.

Brussels is pressing for sovereign debt from across the eurozone to be bundled into a new financial instrument and sold to investors as part of a proposal to strengthen the single currency area, the Financial Times reported. A European Commission paper on the future of the euro, seen by the Financial Times, advocates the launching of a market of “sovereign bond-backed securities” — packaging different countries’ national debt into a new asset.

Investors’ hunger for yield can appear callous when people are genuinely starving. One of the more anomalous trades in emerging market debt originates in Venezuela, the South American nation in the midst of a brutal economic meltdown that has resulted in a malnutrition outbreak. Against the odds, the country has been intent on servicing its financial obligations — dubbed “Hunger Bonds” by Ricardo Hausmann, a former Venezuelan official, the Financial Times reported.

The European Union has agreed on new measures to revive the region’s asset backed securities market while imposing rules on the industry to minimize risk-taking, The Wall Street Journal reported. Late Tuesday night, after 18 months of discussions, lawmakers and EU governments reached a political agreement on a proposal put forward by the EU’s executive arm, the European Commission, that is part of the bloc’s plan to bolster capital markets.

A Berlin-based law professor has filed a cease-and-desist request aimed at quickly ending Germany’s involvement in bond purchases by the European Central Bank, a surprise legal move that underlines mounting German anger over the ECB’s easy-money policies, The Wall Street Journal reported.