U.S. housing recovery loses a step as pending home sales fall

A real estate sales sign sits outside of a house for sale in Phoenix, Arizona June 2, 2009.

Credit: Reuters/Joshua Lott

By Jason Lange

WASHINGTON | Wed Aug 28, 2013 10:51am EDT

WASHINGTON (Reuters) - Contracts to purchase previously owned U.S. homes fell for the second straight month in July, a sign that rising mortgage rates are taking the steam out of America's housing market recovery.

The National Association of Realtors said on Wednesday its Pending Homes Sales Index, based on contracts signed last month, decreased 1.3 percent to 109.5.

That was a steeper decline than most analysts had expected, and could provoke added caution at the U.S. Federal Reserve over plans to reduce a bond-buying economic stimulus program.

"Higher mortgage rates (are) beginning to take some bloom off the buoyancy in the housing market," said Millan Mulraine, an economist at TD Securities in New York.

The data had little impact on Wall Street, where the focus was on the potential for a military strike by the United States against Syria. U.S. stocks opened flat, while yields on U.S. government debt rose.

Contracts fell across most of the country, with losses concentrated in the Northeast and the West.

The U.S. housing market was battered by the 2007-09 recession but appeared to turn a corner early last year when home prices began to rise again.

Since May of this year, however, mortgage rates have risen dramatically on bets the Fed would reduce monthly bond purchases before long.

Last week, the average rate for 30-year mortgages rose 12 basis points to 4.8 percent, the Mortgage Bankers Association said in a separate report.

Rates have surged more than a percentage point since May, when officials at the Fed began dropping stronger hints that the central bank would begin withdrawing monetary stimulus.

This already appears to be reducing the pace of price gains as well as refinancing activity. Loan applications for home purchases have also fallen sharply since May, although they ticked higher last week.

Still, rates remain low by historical standards, and most economists think the housing sector will continue to recover, albeit at a slower pace.

In a Reuters survey published on Wednesday, economists said household formation and a tight supply of properties available for sale would shield the housing market from a spike in home lending rates.

The poll forecast sales of previously owned homes at an average annual rate of 5.20 million units in the third quarter, picking up slightly to a 5.24 million unit pace in the final three months of the year.

The average 30-year rate was seen averaging 4.17 percent this year, jumping to 4.90 percent in 2014. In the May poll, economists had forecast it would average 3.58 percent this year.

(Reporting by Jason Lange; Editing by Chizu Nomiyama and Krista Hughes)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Argentina loses U.S. appeal in $1.33 billion bondholder fight

By Nate Raymond and Jonathan Stempel

NEW YORK | Fri Aug 23, 2013 5:57pm EDT

NEW YORK (Reuters) - Argentina on Friday lost its appeal of a U.S. court order requiring it to pay $1.33 billion to hedge funds that refused to accept steep discounts when the nation restructured its debt.

The decision by the 2nd U.S. Circuit Court of Appeals in New York is the latest in a standoff between U.S. courts and the Argentine government that some investors fear could lead Argentina to default. The court stayed the decision pending review by the U.S. Supreme Court, giving Argentina a reprieve and nervous investors some relief.

While Argentina and its supporters have said a ruling against it could threaten future sovereign debt restructurings, the court said the case was an "exceptional one" that would have little impact on future transactions.

The court also had harsh words for the government of Argentine President Cristina Fernandez, which has called the hedge funds vultures and vowed not to pay them.

"Argentina's officials have publicly and repeatedly announced their intention to defy any rulings of this Court and the district court with which they disagree," Circuit Judge Barrington Parker wrote for a three-judge appeals panel.

Argentina did not comment on the decision on Friday. Economy Minister Hernan Lorenzino, asked about the decision during a trip to Chile, declined to comment.

The case stems from Argentina's $100 billion default on its debt in 2001. In two subsequent restructurings, in 2005 and 2010, creditors holding about 93 percent of the debt received 25 cents to 29 cents on the dollar.

Dissident bondholders led by the hedge funds NML Capital Ltd, which is a unit of Paul Singer's Elliott Management Corp, and Aurelius Capital Management refused to go along with the restructurings, arguing in court that they should be paid in full.

The case came to a head in November 2012, when U.S. District Judge Thomas Griesa in New York ordered Argentina to pay $1.33 billion into a court-controlled escrow account for the dissident bondholders.

He also ordered Argentina not to pay its other bondholders without making the payment, raising the prospect that Argentina could go into default.

The U.S. Supreme Court starts its new term in October and, if it agrees to take the case, may not rule until the next June.

Initially, investors in Argentine assets breathed a sigh of relief, but by the end of the day the Merval index .MERV of Argentine blue chips had closed lower.

For the longer term, investors signaled continued worries.

The cost to protect $10 million of Argentine sovereign debt against default for five years rose to $2.53 million annually from $2.28 million on Thursday, according to Markit. The cost suggests that many investors consider it likely the debt will go into default.

"The court's decision against Argentina is what we have been expecting," said Stuart Culverhouse, head of research at Exotix in London. "Market disappointment may be tempered though by the continuation of the stay with the Supreme Court appeal."

In the decision, Parker wrote that the court believed "it is equitable for one creditor to receive what it bargained for, and is therefore entitled to, even if other creditors, when receiving what they bargained for, do not receive the same thing.

"Because the district court's decision does no more than hold Argentina to its contractual obligation of equal treatment, we see no abuse of discretion," Parker added.

'NOT ABOUT THE LAW'

Friday's ruling rejected Argentina's arguments that the order to pay the holdout bondholders would unjustly hurt itself, participants in the bond payment system and the public.

It also rejected a claim by bondholders who agreed to the restructuring that Griesa's ruling would prevent them from being paid, based on Argentina's refusal to pay the holdouts.

"This type of harm - harm threatened to third parties by a party subject to an injunction who avows not to obey it - does not make an otherwise lawful injunction 'inequitable,'" Parker wrote.

Sean O'Shea, a lawyer for a group of bondholders including Gramercy Funds Management LLC who participated in the debt restructuring, said the opinion "unfortunately glosses over" the impact on his clients.

But Theodore Olson, a lawyer for NML, one of the dissident hedge funds, said the ruling "confirms that Argentina is not above the law."

At times, Friday's ruling reflected seeming frustration of the court with Argentina.

Parker said that in light of the "unusual nature of this litigation," the court had invited Argentina to propose an alternative payment formula that it was willing to commit. Argentina put forward "no productive proposals," he wrote.

The opinion quoted Jonathan Blackman, Argentina's lawyer, as even telling the court during arguments that the country "would not voluntarily obey" Griesa's injunctions if they were upheld.

NEXT STOP: SUPREME COURT

Argentina has already sought Supreme Court review of a ruling by the 2nd Circuit in October last year that Argentina had broken a contractual obligation to treat bondholders equally. A footnote to Friday's ruling suggested that the Supreme Court justices may wait instead for an appeal from the more recent decision.

That would delay the high court taking action on the appeal, although it could still potentially decide the case by the end of the court's next term, which starts in October and runs until June 2014.

Resolution of the case could be delayed further if the justices ask the Obama administration to weigh on whether they should hear the case. Then, the court might not rule on the case, if it decides to hear it, until the term that starts in October 2014.

In Friday's ruling, the 2nd Circuit also said that New York's status as a financial center depended on enforcing the ruling.

"We believe that the interest - one widely shared in the financial community - in maintaining New York's status as one of the foremost commercial centers is advanced by requiring debtors, including foreign debtors, to pay their debts," Parker wrote.

The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.

(Additional reporting by Hugh Bronstein in Buenos Aires and Lawrence Hurley in Washington; Editing by Eddie Evans, Dan Grebler and Bernard Orr)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Argentina loses U.S. appeal in $1.33 billion bondholder fight

By Nate Raymond and Jonathan Stempel

NEW YORK | Fri Aug 23, 2013 5:57pm EDT

NEW YORK (Reuters) - Argentina on Friday lost its appeal of a U.S. court order requiring it to pay $1.33 billion to hedge funds that refused to accept steep discounts when the nation restructured its debt.

The decision by the 2nd U.S. Circuit Court of Appeals in New York is the latest in a standoff between U.S. courts and the Argentine government that some investors fear could lead Argentina to default. The court stayed the decision pending review by the U.S. Supreme Court, giving Argentina a reprieve and nervous investors some relief.

While Argentina and its supporters have said a ruling against it could threaten future sovereign debt restructurings, the court said the case was an "exceptional one" that would have little impact on future transactions.

The court also had harsh words for the government of Argentine President Cristina Fernandez, which has called the hedge funds vultures and vowed not to pay them.

"Argentina's officials have publicly and repeatedly announced their intention to defy any rulings of this Court and the district court with which they disagree," Circuit Judge Barrington Parker wrote for a three-judge appeals panel.

Argentina did not comment on the decision on Friday. Economy Minister Hernan Lorenzino, asked about the decision during a trip to Chile, declined to comment.

The case stems from Argentina's $100 billion default on its debt in 2001. In two subsequent restructurings, in 2005 and 2010, creditors holding about 93 percent of the debt received 25 cents to 29 cents on the dollar.

Dissident bondholders led by the hedge funds NML Capital Ltd, which is a unit of Paul Singer's Elliott Management Corp, and Aurelius Capital Management refused to go along with the restructurings, arguing in court that they should be paid in full.

The case came to a head in November 2012, when U.S. District Judge Thomas Griesa in New York ordered Argentina to pay $1.33 billion into a court-controlled escrow account for the dissident bondholders.

He also ordered Argentina not to pay its other bondholders without making the payment, raising the prospect that Argentina could go into default.

The U.S. Supreme Court starts its new term in October and, if it agrees to take the case, may not rule until the next June.

Initially, investors in Argentine assets breathed a sigh of relief, but by the end of the day the Merval index .MERV of Argentine blue chips had closed lower.

For the longer term, investors signaled continued worries.

The cost to protect $10 million of Argentine sovereign debt against default for five years rose to $2.53 million annually from $2.28 million on Thursday, according to Markit. The cost suggests that many investors consider it likely the debt will go into default.

"The court's decision against Argentina is what we have been expecting," said Stuart Culverhouse, head of research at Exotix in London. "Market disappointment may be tempered though by the continuation of the stay with the Supreme Court appeal."

In the decision, Parker wrote that the court believed "it is equitable for one creditor to receive what it bargained for, and is therefore entitled to, even if other creditors, when receiving what they bargained for, do not receive the same thing.

"Because the district court's decision does no more than hold Argentina to its contractual obligation of equal treatment, we see no abuse of discretion," Parker added.

'NOT ABOUT THE LAW'

Friday's ruling rejected Argentina's arguments that the order to pay the holdout bondholders would unjustly hurt itself, participants in the bond payment system and the public.

It also rejected a claim by bondholders who agreed to the restructuring that Griesa's ruling would prevent them from being paid, based on Argentina's refusal to pay the holdouts.

"This type of harm - harm threatened to third parties by a party subject to an injunction who avows not to obey it - does not make an otherwise lawful injunction 'inequitable,'" Parker wrote.

Sean O'Shea, a lawyer for a group of bondholders including Gramercy Funds Management LLC who participated in the debt restructuring, said the opinion "unfortunately glosses over" the impact on his clients.

But Theodore Olson, a lawyer for NML, one of the dissident hedge funds, said the ruling "confirms that Argentina is not above the law."

At times, Friday's ruling reflected seeming frustration of the court with Argentina.

Parker said that in light of the "unusual nature of this litigation," the court had invited Argentina to propose an alternative payment formula that it was willing to commit. Argentina put forward "no productive proposals," he wrote.

The opinion quoted Jonathan Blackman, Argentina's lawyer, as even telling the court during arguments that the country "would not voluntarily obey" Griesa's injunctions if they were upheld.

NEXT STOP: SUPREME COURT

Argentina has already sought Supreme Court review of a ruling by the 2nd Circuit in October last year that Argentina had broken a contractual obligation to treat bondholders equally. A footnote to Friday's ruling suggested that the Supreme Court justices may wait instead for an appeal from the more recent decision.

That would delay the high court taking action on the appeal, although it could still potentially decide the case by the end of the court's next term, which starts in October and runs until June 2014.

Resolution of the case could be delayed further if the justices ask the Obama administration to weigh on whether they should hear the case. Then, the court might not rule on the case, if it decides to hear it, until the term that starts in October 2014.

In Friday's ruling, the 2nd Circuit also said that New York's status as a financial center depended on enforcing the ruling.

"We believe that the interest - one widely shared in the financial community - in maintaining New York's status as one of the foremost commercial centers is advanced by requiring debtors, including foreign debtors, to pay their debts," Parker wrote.

The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.

(Additional reporting by Hugh Bronstein in Buenos Aires and Lawrence Hurley in Washington; Editing by Eddie Evans, Dan Grebler and Bernard Orr)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Argentina loses U.S. appeal in $1.33 billion bondholder fight

By Jonathan Stempel

NEW YORK | Fri Aug 23, 2013 10:35am EDT

NEW YORK (Reuters) - Argentina on Friday lost its appeal of a U.S. judge's order requiring that it pay $1.33 billion to bondholders who refused to participate in two debt restructurings after the country's $100 billion default more than a decade ago.

But the 2nd U.S. Circuit Court of Appeals in New York delayed implementing the decision pending a ruling by the U.S. Supreme Court.

The appeals court's decision marked a major victory for the so-called "holdout" bondholders, led by NML Capital Ltd, a unit of billionaire hedge fund manager Paul Singer's Elliott Management Corp, and Aurelius Capital Management.

U.S. Circuit Judge Barrington Parker, writing for the three-judge panel, said the court believed "it is equitable for one creditor to receive what it bargained for, and is therefore entitled to, even if other creditors, when receiving what they bargained for, do not receive the same thing."

"Because the district court's decision does no more than hold Argentina to its contractual obligation of equal treatment, we see no abuse of discretion," he added.

The appellate ruling upheld a November 2012 decision that required Argentina to pay the money into a court-controlled escrow account by the time of its next interest payment to the bondholders who agreed to swap their debt in 2005 and 2010.

Dissident bondholders have long argued that Buenos Aires continues to defy U.S. law by not paying them in full. Argentina has said that if it is forced to pay the dissidents, then future sovereign restructurings would be impossible to hammer out.

Argentina has called holdouts like NML and Aurelius "vultures." About 93 percent of the country's bonds were restructured, with creditors receiving 25 cents to 29 cents on the dollar.

In October 2012, the 2nd Circuit said Argentina violated an equal treatment clause in the contracts governing its bonds.

In November, U.S. District Judge Thomas Griesa ordered Argentina to pay $1.33 billion owed to the holdout bondholders into an escrow account before making its next interest payment to creditors who participated in the restructurings.

The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.

(Reporting by Nate Raymond in New York; Editing by Jeffrey Benkoe and W Simon)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.