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Italian Bonds Suffer Worst Day in More Than 25 Years

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Bond
  • Italian Bonds Suffer Worst Day in More Than 25 Years

A deepening political crisis in Italy, the euro zone’s third biggest economy, fuelled a selloff in Italian assets and the euro on Tuesday that was reminiscent of the euro zone debt crisis of 2010-2012.

Short-term Italian bond yields were set for their biggest one-day jump since 1992 IT2YT=RR, while Italian and wider euro zone banking stocks headed for their worst day since August 2016 .FTIT8300. At an auction of six-month debt, the government had to pay investors the highest yield in more than five years.

The moves come after Italy’s president appointed a former International Monetary Fund official as interim prime minister, with the task of planning for snap polls and passing a budget.

Investors believe the election will deliver an even stronger mandate for anti-establishment, eurosceptic politicians, casting doubt on the Italy’s future in the euro zone.

“The spectacular rise of 2-year yields in Italy this morning reflects break-up or redenomination fears,” Martin van Vliet, ING Bank’s senior fixed income strategist, said.

Italy’s central bank chief warned on Tuesday that the state was only “a few short steps” from losing investors’ trust.

Ratings agency Moody’s warned that Italy was likely to face a downgrade if a new government pursues fiscal policies that do not put debt levels on a sustainable downward path.

While the 5-Star Movement and far-right League have dropped plans to take power, they have now switched to campaign mode. 5-Star has called for protests against President Sergio Mattarella’s rejection of the parties’ nominee for economy minister, Paolo Savona, who has argued for Italy to quit the euro.

So far, the European Central Bank’s bond buying programme has provided a powerful backstop to euro zone government debt, but latest market moves suggest this buffer may have lost its punch.

The closely-watched Italian-German 10-year bond yield spread, seen by many investors as an indicator of sentiment towards the euro zone, was at its widest since June 2013. IT10YT=RR DE10YT=RR.

The spread rose above 300 basis points, having almost tripled from end-April levels around 115 bps. In 2011, at the height of the euro debt crisis, that gap was at 560 bps.

“With such an unclear Italian political situation, investors will continue to demand a significant uncertainty premium,” said Isabelle Vic-Philippe, head of euro government bonds at Amundi, one of Europe’s largest investors.

Italy’s 2-year yield spiked more than 150 bps to 2.73 percent, while 10-year bond yields jumped 50 bps to their highest level in over four years at 3.38 percent IT10YT=RR. Italian bond yields traded above U.S. Treasury yields US10YT=RR for the first time in almost a year.

The Italian 2-10 year bond yield spread was at 42 bps — its tightest since 2011 — having been at 220 bps a week ago.

The cost of insuring exposure to Italian risk in the five-year credit default swaps market rose to a 4-1/2 year high of 225 basis points, a jump of 49 basis points on the day, data from IHS Markit showed.

“Taking any position in Italian debt, long or short is dangerous right now,” said David Roberts, head of global fixed income, Liontrust Asset Management.

A rush to safe havens briefly pushed Germany’s 10-year bond yield to 0.19 percent DE10YT=RR, its lowest in more than a year.

The rise in borrowing costs and potential knock-on effects on the euro bloc saw money markets further trim bets that the ECB will raise interest rates in June 2019. They now bet on a 30 percent chance of a 10 bps rate rise that month, half of what was priced last week.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Forex

Akinwumi Adesina Extols Africans in Diaspora on Cross-Border Remittance

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Akinwunmi Adesina - Investors King

African Development Bank (AfDB) President, Akinwumi Adeshina has extolled the tenacity and impacts of Africans in Diaspora on cross-border remittance.

According to the AfDB President, Africans in the diaspora are the continent’s largest financiers through their yearly remittances.

Speaking at an event organised by the Bank in collaboration with the African Union Commission, Adeshina noted that cross-border remittance into Africa is more than development assistance to the continent. 

Investors King earlier reported that remittance into Nigeria and other countries in the sub-Sahara Africa region hits $53 billion in 2022.

The AfDB President said, “The value of remittances from the African diaspora doubled from $37 billion in 2010 to $87 billion in 2019, reaching $95.6 billion by 2021. Yet official development assistance to Africa in 2021 was $35 billion, or 36% of the remittances from the diaspora”.

Adeshina added that Egypt and Nigeria are among the top-ten remittance recipients globally, with $31.5 billion and $19.2 billion, respectively in 2021. 

While speaking on the advantage of cross-border remittance to the African continent, the AfDB president noted that remittances have helped to meet financial, food, education, and health needs of many Africans, “it as well as serve as countercyclical sources of finance,” he said.

“The African diaspora has become the largest financier in Africa! And it is not debt, it is 100% gifts or grants, a new form of concessional financing that is the key for livelihood and security for millions of Africans” he added.

Similarly, Adeshina further positioned the need to eliminate premium charges on cross-border remittance into Africa. He noted that cross-border into Africa is twice what is it for South Asia.

He concluded that the Africans in diaspora can add more than remittance and investment, noting that they have skills, knowledge and know-how which can be needed for the development of the continent.

“They can help build world-class universities, and they can be mentors for the new generation of Africans,” he said. 

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eNaira

E-Naira Transaction Volume Rises to N5 Billion in November Amid Intensified Campaign

More Nigerians embrace eNaira wallet as CBN takes adoption campaign across the nation

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The Central Bank of Nigeria, (CBN) has disclosed that e-Naira transaction volume rose to a record N5 billion in the month of November following a series of campaigns initiated to encourage adoption.

Investors King had earlier reported how the e-Naira adoption team visited a number of parks in Abuja and the University of Lagos among other locations to drive the adoption of the digital currency. 

Speaking at the Second Edition of the Africa Cashless Payment Conference, CBN’s Director of Information and Technology, Hajiya Rakiya Mohammed noted that transaction on the e-naira platform does not attract any charges. 

She stated that Nigeria’s financial ecosystem is large to accommodate everyone.

Hajia Rakiya added that the e-Naira platform can be operated in any of Nigeria’s major local languages, stating that onboarding onto the e-Naira platform is a simple process. 

She further stressed that the primary goal of the e-naira is to reduce the amount of cash in circulation, thereby downsizing the cost of producing paper currency, increase in revenue and direct disbursement to citizens.

Meanwhile, the e-Naira circulation has reached N401.82 million as more Nigerians embraced the digital currency. 

It could be recalled that on October 25, 2021, CBN launched the e-Naira making Nigeria the first African country to have a digital currency. 

During the unveiling of the e-Naira in Abuja, President Muhammadu Buhari stated that the digital naira would increase remittances, foster cross-border trade, improve financial inclusion and enable the government to make welfare payments more easily.

On his part, the CBN Governor, Godwin Emefiele disclosed that the e-Naira offered Nigerians endless possibilities in using financial services. 

While admonishing more Nigerians to embrace the digital naira, Hajia Rakiya noted that “both banked and unbanked can use it, and it can be done through USSD *997#. We have integrated it with telecoms and NIBBS instant payments plus integration with money transfer operations so you can use e-naira for cross border”.

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Naira

CBN Will Redesign Naira Notes Every Five to Eight Years; Say Emefiele

The central bank will henceforth redesign the nation’s legal tender every five to eight years

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New Naira Notes

Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has said the bank will henceforth redesign the nation’s legal tender every five to eight years.

The apex bank governor revealed at the unveiling of the new naira notes on Tuesday. 

Godwin Emefiele explained that the naira redesign is in line with global best practice noting that the naira needed to be redesigned and re-issued every five to eight years.

According to the CBN governor, previous administrations lacked the political will to approve the redesign of the naira notes. Stating that it is regrettable that the naira has not been redesigned for the past 19 years. 

“In the past, I have to confess that attempts by the CBN to redesign and re-issue the naira notes have been resisted. It is only President Muhammadu Buhari that has exhibited the courage to do so,” the CBN governor stated. 

Emefiele added that going forward, naira notes will be redesigned at intervals to address some peculiar issues. 

 “After today, the CBN will begin to redesign and reissue the naira every five to eight years,” he said. 

Investors King had earlier reported that President Muhammadu Buhari unveiled the redesigned naira notes at the Federal Executive Council (FEC) meeting today. 

Among those who joined the president with the unveiling include the CBN governor and the EFCC chairman.

Recall, in October, the CBN announced it will redesign the N200, N500 and N1,000 notes in line with its mandate.

Meanwhile, the CBN governor has disclosed that the new naira notes can not be counterfeited because of the features embedded in them. 

Similarly, he added that security agencies would be monitoring people making withdrawals at the counter to sniff out money laundering and unravel illegal usage. 

“The CBN has moved to a cashless economy. We will restrain the volume of cash someone will withdraw over the counter. We will follow up with the person’s data to know the reason for such withdrawal,” he concluded.

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