Business News: Afghanistan: Land of War and Opportunity

Business News: Afghanistan: Land of War and Opportunity

Afghanistan: Land of War and Opportunity

Posted: 06 Jan 2011 02:00 PM PST

The Drug Trade's Latest Victim, a Town

Posted: 05 Jan 2011 12:55 PM PST

Mail-Order Brides

Posted: 06 Jan 2011 02:00 PM PST

How to Meet, and Perhaps Marry, a Bride

Posted: 06 Jan 2011 02:00 PM PST

Facebook's Initial Private Offering

Posted: 06 Jan 2011 02:00 PM PST

Goldman Efforts to Burnish Image May Be Undermined by Facebook

Posted: 06 Jan 2011 09:30 PM PST

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By Christine Harper

Jan. 7 (Bloomberg) -- Just as Goldman Sachs Group Inc. prepares to unveil business standards aimed at improving its reputation after settling fraud charges last year, the Facebook Inc. stock sale to clients shines new light on the firm’s potential conflicts of interest.

In pitching as much as $1.5 billion in stock in the closely held social-networking company to wealthy investors, Goldman Sachs disclosed that it might sell or hedge its own $375 million investment without warning clients. The company’s disclosures didn’t reveal that one of its star fund managers, Richard A. Friedman, rejected the deal as inappropriate for his clients.

Chief Executive Officer Lloyd C. Blankfein, 56, created a business standards committee last May after the U.S. Securities and Exchange Commission sued Goldman Sachs for fraud. The SEC alleged that the firm misled investors in a 2007 mortgage-linked investment by failing to inform them of a hedge fund’s plan to bet against the investment. The committee’s report, which could be released as soon as next week, will address how the company can “reinforce the firm’s client focus and improve upon the transparency of our activities,” according to a May statement.

“The committee was undertaken in the hope and the commitment to do some things that were going to help restore and improve trust,” said James Post, a professor at Boston University’s School of Management who focuses on corporate governance and ethics. Instead, “people are going to look at it and say do those standards seem credible in light of the Facebook deal?”

Stephen Cohen, a spokesman for the New York-based firm, declined to comment.

SEC Inquiry

The SEC has asked Goldman Sachs for information about the offering, according to a person familiar with the matter who spoke on condition of anonymity. The firm disclosed the SEC’s inquiry in a package sent to potential investors, said a person who has seen the document. SEC spokesman John Nester declined to comment. The New York Times reported the SEC inquiry yesterday.

At the heart of the problem for Goldman Sachs is that it -- like most securities firms -- treats some clients differently from others. While funds such as Friedman’s Goldman Sachs Capital Partners serve as a fiduciary, requiring they make only the best possible investments for clients, the rest of the firm can sell investors anything deemed “suitable” -- a threshold easily overcome if the buyer is wealthy enough to be defined as a sophisticated investor.

“It’s certainly a Goldman Sachs problem, but it’s also an industry problem,” said Michael Farr, president and founder of Washington-based Farr, Miller & Washington LLC, which manages $725 million, including shares in Goldman Sachs. “Having an obligation to your shareholders as an investment bank to remain profitable means that you’re going to be making money off of your clients, and so there is an inherent conflict.”

ACA Lawsuit

In response to the SEC suit, Goldman Sachs argued that it was under no obligation to inform the investors about the fund’s plan because they were “among the most sophisticated mortgage investors in the world” and capable of making their own decisions about the assets. In July, the firm settled the case with the SEC by paying $550 million and admitting a “mistake” in omitting the disclosure.

Yesterday ACA Financial Guaranty Corp., one of the investors that lost money in the Goldman Sachs Abacus deal at the heart of the SEC’s suit, sued the firm in New York State Supreme Court in Manhattan for at least $120 million. The bond insurer accused Goldman Sachs of “egregious conduct” and said the firm deceived ACA into believing that the hedge fund, Paulson & Co., was investing alongside ACA when in fact it was planning to bet against the Abacus vehicle. Michael DuVally, a spokesman for Goldman Sachs, declined to comment about the suit.

Senate Grilling

Soon after the SEC filed its case, members of the U.S. Senate’s Permanent Subcommittee on Investigations grilled Goldman Sachs executives, employees and former employees for more than 10 hours in a public hearing in which they questioned how the firm justified selling investments to clients it was betting against. Among the questions was whether Goldman Sachs’s mortgage department felt it should put clients’ best interests first. The responses tried to make it clear that the division didn’t act as a fiduciary.

“We should work with clients to help them achieve their objectives,” Daniel L. Sparks, a former head of Goldman Sachs’s mortgage division, told the Senate panel at the April 27 hearing. “That doesn’t mean that we’re always going to have the same view on a particular investment.”

The hearing sparked a debate about whether brokers and derivatives traders should be required to act as fiduciaries for their clients. In the end, the Dodd-Frank Act didn’t include a requirement to do so, instead calling on the SEC to study whether changes are necessary.

‘Undermines and Erodes’

“As long as you have these different standards operating, the clients are going to bear the responsibility of asking their adviser which standard are you treating me under?” said Boston University’s Post. “It undermines and erodes the trust that might otherwise exist between the client and the adviser.”

That problem is unlikely to be solved by whatever Goldman Sachs’s business standards committee report proposes, Post said.

Goldman Sachs said in May that it would release the committee’s report publicly after the company’s board meeting in mid-December. The committee’s co-heads are E. Gerald Corrigan, the former Federal Reserve Bank of New York president who has worked for Goldman Sachs since 1994, and J. Michael Evans, the company’s vice chairman and chairman of Goldman Sachs Asia.

The committee, comprised of 17 people who work for the firm, was already facing skepticism from investors and clients as a public relations maneuver.

“It’s mostly PR, which I guess is relevant because they live in an increasingly regulated world, so they need to keep PR on their side,” said Benjamin Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which manages about $900 million. “I don’t think it changes anyone’s opinion of them.”

--With assistance from Max Abelson and Karen Freifeld in New York. Editors: Robert Friedman, Dan Reichl

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

Facebook: The $50 Billion Question

Posted: 06 Jan 2011 08:57 AM PST

For MBAs, Breaking Even Is a More Distant Dream

Posted: 06 Jan 2011 11:45 AM PST

Table: Ranking Return on Investment

Posted: 07 Jan 2011 04:49 AM PST

European Central Bank Said to Buy Portuguese Government Debt

Posted: 07 Jan 2011 04:42 AM PST

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By Paul Dobson and Anchalee Worrachate

Jan. 7 (Bloomberg) -- The European Central Bank bought Portuguese government debt, according to two people with knowledge of the transactions.

The purchases mostly involved short-term securities, said one of the people, who asked not to be identified because the trades are confidential. A spokesman for the ECB in Frankfurt declined to comment.

Ten-year Portuguese bonds fell, sending the yield up 20 basis points to 7.38 percent as of 10:37 a.m. in London.

--Editors: Keith Campbell, Daniel Tilles.

To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

Dollar Index Gains as Optimism Over Payrolls Boosts U.S. Assets

Posted: 07 Jan 2011 04:23 AM PST

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By Lucy Meakin and Ron Harui

Jan. 7 (Bloomberg) -- The Dollar Index headed for its biggest weekly advance since August before a U.S. report today that may show employers added jobs for a third month, supporting demand for assets in the world’s largest economy.

The euro headed for a weekly loss versus all but one of its 16 major counterparts amid concern that European governments will struggle to raise funds as the region’s fiscal crisis lingers. The Australian dollar traded at a two-week low against its U.S. counterpart as worsening floods hampered the South Pacific nation’s coal industry. An ADP Employer Services report on Jan. 5 showed U.S. companies hired almost triple the number of people estimated by economists.

“It’s payrolls and looking at the better tone of the dollar this week, or at least since the ADP; the market is clearly expecting something fairly decent,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “The dollar is looking to remain firm.”

The dollar rose 0.2 percent to 83.51 yen at 6:46 a.m. in New York, after touching 83.60 yen, the highest level since Dec. 22. The euro depreciated for a fifth day to $1.2988 after earlier falling to $1.2961, the weakest since Sept. 15. The single currency was at 108.44 yen, from 108.35 yen.

The Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners including the euro and the yen, rose 0.1 percent, a fifth day of gains. It headed for a weekly advance of 2.4 percent, the most since the five days ending Aug. 13.

Economists have raised forecasts for the number of jobs added by U.S. employers in December after the ADP report this week showed the biggest jump in company payrolls since records began in 2001.

Jobs Forecasts

The median forecast in a Bloomberg News survey calls for a 150,000 gain last month, ahead of today’s data from the Labor Department. That’s up from 135,000 estimated before the ADP report. Unemployment is estimated to have fallen to 9.7 percent in December from 9.8 percent the previous month.

“The dollar is the strongest among the Group of Three currencies,” said Koji Fukaya, chief currency strategist at Credit Suisse Group AG in Tokyo. “The dollar sell-off ended as the U.S. economic outlook brightened. We’ve seen a 180-degree change from last year.”

Societe Generale SA advised investors to buy the dollar against the yen, in “an unabashed bet on better U.S. economic data and a potential break upwards in short-term rates,” analysts led by Kit Juckes, London-based head of foreign- exchange research, wrote in an investor report yesterday. “Better U.S. data are spurring rising global risk appetite and the yen looks vulnerable.”

Speculate

Investors should speculate that the dollar will appreciate to 86 yen, and end the trade if it weakens to 82 yen, the analysts wrote.

The dollar dropped 3.4 percent last year in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The greenback has risen 2.3 percent since the end of 2010.

One week implied volatility on the euro versus the dollar rose to the highest since December 3 as the greenback headed for its biggest gain against the 17-nation common currency in six weeks.

Europe’s common currency touched a three-month low versus its U.S. counterpart before Italy, Portugal and Spain sell bonds next week. Portuguese government bonds today led losses by securities from Europe’s high-deficit nations amid concern demand for such debt is flagging before auctions to help service maturing obligations this quarter.

Europe Debt Sales

“There’s an increased focus on the sovereign-debt profile of the likes of Portugal and Spain,” said Alex Sinton, senior currency dealer at ANZ National Bank Ltd. in Auckland. “The euro is headed for the $1.2950 area.”

Borrowing costs for Portugal surged at a six-month bill sale this week, the first of Europe’s high-deficit nations to test investor demand in 2011 after the threat of default forced Greece and Ireland to seek bailouts last year. The nation, which intends to sell as much as 20 billion euros in bonds to finance its budget and redemptions this year, sold 500 million euros of bills with a yield of 3.686 percent on Jan. 5, up from 2.045 percent at a sale of similar-maturity securities in September.

Australia

The euro’s survival in its present form “can no longer be taken for granted,” said Thomas Mayer, chief economist of Deutsche Bank AG, according to an interview with the London- based Times. Mayer said European Union policymakers have to move faster to reform the euro region to avoid another crisis, according to the newspaper.

The pound traded near a month high versus the euro as investors bet on the U.K.’s stronger growth prospects.

The British economy will grow 2 percent this year and 2.1 percent in 2012, outpacing the euro area, which is forecast to grow 1.5 percent this year and 1.8 percent next year, according to a Bloomberg survey of economists’ forecasts.

Sterling was little changed at 83.99 pence per euro, after touching 83.94 pence, its strongest level since Dec. 13.

Australia’s dollar was poised for its first weekly decline since Dec. 10 as record rainfall in Queensland spread floods across an area the size of France and Germany, disrupting coal mine and rail operations.

Coal Exports

The flooding is “a very expensive problem,” said Kurt Magnus, executive director of foreign-exchange sales at Nomura Holdings Inc. in Sydney. “The Australian dollar is trapped between the U.S. dollar strength and a global economic recovery led by the U.S. The short-term risk for the Aussie is to go lower.”

Queensland coal exports may be cut by as much as 30 million metric tons if heavy rain and flooding continues across the state into February, the Australian newspaper reported today, citing a forecast from UBS AG. The loss in shipments may cost A$6 billion, the newspaper calculated, using government price forecasts. Australia is the world’s biggest coal exporter when supplies of coking coal to make steel and thermal coal to generate power are combined.

The flooding will cost the country’s economy about 0.4 percent of gross domestic product, Nomura’s Magnus said.

Australia’s currency bought 99.31 U.S. cents from 99.44 cents yesterday, extending declines into a fifth day. The Aussie earlier touched 99.08 cents, the least since Dec. 21, and is set for a 3.1 percent drop this week. The so-called Aussie was 0.2 percent stronger at 82.98 yen.

--With assistance from Paul Dobson and Emma Charlton in London and Monami Yui in Tokyo. Editors: Mark McCord, Peter Branton.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

Internet Identity System Said Readied by Obama Administration

Posted: 07 Jan 2011 04:10 AM PST

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By James Sterngold

Jan. 7 (Bloomberg) -- The Obama administration plans to announce today plans for an Internet identity system that will limit fraud and streamline online transactions, leading to a surge in Web commerce, officials said.

While the White House has spearheaded development of the framework for secure online identities, the system led by the U.S. Commerce Department will be voluntary and maintained by private companies, said the officials, who spoke on condition of anonymity ahead of the announcement.

A group representing companies including Verizon Communications Inc., Google Inc., PayPal Inc., Symantec Corp. and AT&T Inc. has supported the program, called the National Strategy for Trusted Identities in Cyberspace, or NSTIC.

“This is going to cause a huge shift in consumer use of the Internet,” said John Clippinger, co-director of the Law Lab at Harvard’s Berkman Center for Internet and Society in Cambridge, Massachusetts. “There’s going to be a huge bump and a huge increase in the amount and kind of data retailers are going to have.”

Most companies have separate systems for signing on to e- mail accounts or conducting secure online transactions, requiring that users memorize multiple passwords and repeat steps. Under the new program, consumers would sign in just once and be able to move among other websites, eliminating the inconvenience that causes consumers to drop many transactions.

Fewer Passwords

For example, once the system is in place, Google would be able to join a trusted framework that has adopted the rules and guidelines established by the Commerce Department. From that point, someone who logged into a Google e-mail account would be able to conduct other business including banking or shopping with other members of the group without having to provide additional information or verification.

Bruce McConnell, a senior counselor for national protection at the Department of Homeland Security, said NSTIC may lead to a big reduction in the size of Internet help desks, which spend much of their time assisting users who have forgotten their passwords. Because the systems would be more secure, he said, it may also result in many transactions that are now done on paper, from pharmaceutical to real estate purchases, to be done online faster and cheaper.

A draft paper outlining NSTIC was released for comment by the White House in June.

‘Who Do You Trust?’

“NSTIC could go a long way toward advancing one of the fundamental challenges of the Internet today, which is -- Who do you trust?” said Don Thibeau, chairman of the Open Identity Exchange, an industry group based in San Ramon, California, representing companies that support development of the new framework.

“What is holding back the growth of e-commerce is not technology, it’s policy. This gives us the rules, the policies that we need to really move forward.”

The new system will probably hasten the death of traditional passwords, Clippinger said. Instead, users may rely on devices such as smartcards with embedded chips, tokens that generate random codes or biometric devices.

“Passwords will disappear,” said Clippinger. “They’re buggy whips. The old privacy and security conventions don’t work. You need a new architecture.”

Secure, Efficient

Development of a more advanced security system began in August 2004, when President George W. Bush issued a Homeland Security Presidential Directive that required all federal employees be given smartcards with multiple uses, such as gaining access to buildings, signing on to government websites and insuring that only people with proper clearances would have access to restricted documents. The system was intended to be more secure and more efficient.

The Obama administration advanced the process when it issued its “Cyberspace Policy Review” in 2009. One of the 10 priorities was the security identification system.

The federal government is facilitating what it calls a “foundational” system in two ways. It is developing the framework for the identification plan, and it will make a large number of government agencies, services and products available through the secure system, from tax returns to reserving campsites at national parks.

“Innovation is one of the key aspects here,” said Ari Schwartz, a senior adviser for Internet policy at the Department of Commerce. “There’s so much that could be done if we could trust transactions more.”

Schwartz said use of the system, once companies voluntarily choose to participate, may spur a range of efficiencies and e- commerce similar to the way ATM machines transformed banking, opening the way to a growing number of services little by little.

Privacy Concerns

Civil libertarians have expressed concern that the system may not protect privacy as well as the government is promising.

“If the concept were implemented in a perfect way it would be very good,” said Jay Stanley, a senior policy analyst for privacy and technology at the New York-based American Civil Liberties Union. “It’s a convenience. But having a single point of failure may not be good for protecting privacy. The devil’s really in the details.” He said the ACLU would “vehemently oppose” anything that resembled a national ID card.

Aaron Brauer-Rieke, a fellow at the Center for Democracy & Technology in Washington, a civil liberties group, said it was important that the system would be operated by private companies, not the government. He said he was concerned about how the data on consumer online transactions would be used.

“New identity systems will allow moving from one site to another with less friction and open up data flows, but might also enable new kinds of targeted advertising,” he said. “We have to make sure privacy doesn’t get lost in this.”

Schwartz and McConnell said the new system wouldn’t be a national identity card and that companies, not the government, would manage the data being passed online.

“There will not be a single data base for this information,” McConnell said.

--Editors: Elizabeth Wollman, Joe Winski

To contact the reporter on this story: James Sterngold in New York at jsterngold2@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

Treasuries Slip Before Jobs Reports as Portuguese Bonds Decline

Posted: 07 Jan 2011 03:56 AM PST

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By Stephen Kirkland

Jan. 7 (Bloomberg) -- Treasuries declined while stocks and U.S. index futures fluctuated before the U.S. employment report. Spanish and Portuguese bonds dropped on concern deteriorating creditworthiness among the region’s banks will exacerbate the debt crisis.

The 10-year U.S. Treasury yield rose five basis points at 6:50 a.m. in New York. The Stoxx Europe 600 Index lost 0.1 percent as Spain’s Banco Santander SA slid 2.1 percent. Standard & Poor’s 500 Index futures were little changed. Portugal’s 10- year bonds jumped 18 basis points to 7.36 percent, and Belgium’s debt risk climbed to a record. The euro weakened, while the Dollar Index gained 0.2 percent. Copper sank 1.4 percent.

The cost of insuring against bank defaults increased to the highest since March 2009 on concern Europe’s most-indebted nations will struggle to fund deficits, while Belgium’s failure to restart talks to form a government raised the prospect of a credit-rating cut. The U.S. labor market probably improved, economists said before today’s report.

“As we prepare ourselves for what could be one of the best payrolls reports since the start of the crisis it is interesting to note the contrasting fortunes of the likely recovery in the U.S. labor market with the continued pressure on European financials and sovereign spreads,” Colin Tan, a strategist at Deutsche Bank AG in Sydney, wrote in a research note.

Nonfarm Payrolls

The yield on the 10-year Treasury note climbed to 3.43 percent. A projected 150,000 gain in payrolls, the median forecast of 78 economists surveyed, would follow a 39,000 November increase and bring the total advance for last year to 1.1 million. Survey projections ranged from 98,000 to 240,000. The forecast climbed from 140,000 at the start of the week after an estimate from ADP Employer Services showed companies boosted employment by 297,000 workers last month.

The unemployment rate dropped to 9.7 percent from 9.8 percent, the survey showed. The Labor Department’s figures are due at 8:30 a.m. in Washington.

U.S. futures were little changed after the S&P 500 fall 0.2 percent yesterday. The gauge, which reached its highest level for more than two years on Jan. 5, has traded with a 14-day relative strength index, which tracks momentum by comparing closing prices with daily trading ranges, above 70 every day this week. Technical analysts say an RSI at that level indicates an index is likely to fall.

Three companies fell for every two that rose on the Stoxx 600. Spanish lender Bankinter SA lost 2.8 percent while Banco Comercial Portugues SA slid 2.6 percent. The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 European banks and insurers rose as much as 6 basis points to 203, according to JPMorgan Chase & Co.

Smith & Nephew

Smith & Nephew Plc dropped 1.6 percent after shares of British medical device maker were downgraded at UBS AG. BHP Billiton Ltd., the world’s largest mining company, led basic- resource stocks lower, sliding 1.3 percent.

The MSCI Emerging Markets Index fell 0.7 percent, Indonesia’s benchmark index slumped 2.8 percent, the most since May, and India’s Sensex dropped 2.7 percent on speculation policy makers may boost interest rates. India’s stocks retreated for a fourth day, the longest losing streak in six weeks.

The extra yield investors demand to hold Portuguese 10-year bonds instead of German bunds increased to the widest since Dec. 1. The spread between Spanish 10-year bonds and German bunds rose six basis points, climbing for a second day, even as a central bank official from China said Europe and the euro will remain among the most important investments for the nation. Irish 10-year yields jumped 11 basis points to 9.30 percent.

Default Risk

Belgian government bonds slid, sending the spread over bunds up 11 basis points to 126 basis points, the highest since Dec. 1. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 1 basis point to a record 214, according to CMA. Swaps on Ireland rose 6 basis points to an all-time high.

The euro depreciated against 11 of its 16 major peers, bringing its weekly decline versus the dollar to 3 percent, the most since the period ended Nov. 26. The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced 0.3 percent, its fifth day of increases, the longest run of gains since Dec. 10. The Swiss franc appreciated against its leading counterparts, rising 0.4 percent versus the euro.

South Africa’s rand depreciated 0.7 percent to a two-week low against the dollar after gold slipped and a government report showed the central bank last month stepped up purchases of foreign currency. The release followed yesterday’s move by Brazil to set reserve requirements for short dollar positions, which drove the real 0.8 percent lower.

The Australian dollar slipped 0.2 percent against the U.S. currency, bringing its weekly decline to 3 percent, amid speculation that the worst floods in the nation’s northeast in half a century may slow the economy and prompt the central bank to refrain from raising interest rates.

Gold for immediate delivery fell 0.9 percent to $1,358.95 an ounce in London. The S&P GSCI Spot Index of commodities dropped 0.1 percent.

--With assistance from David Merritt, Abigail Moses, Daniel Tilles, Jason Webb and Dan Weeks in London. Editors: Stephen Kirkland, Guy Collins

To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net.

To contact the editor responsible for this story: Paul Sillitoe at psillitoe@bloomberg.net.

Vietnam Said to Consider Increasing Reserve Ratios

Posted: 07 Jan 2011 03:42 AM PST

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By Bloomberg News

(Updates with central bank comment in second paragraph.)

Jan. 7 (Bloomberg) -- Vietnam is considering ordering banks to set aside more money as reserves, according to a government official with knowledge of the matter, as policy makers respond to an inflation rate that’s undermining investor confidence.

The measure is one of several that have been presented to Prime Minister Nguyen Tan Dung for approval this month, the official said this week, speaking on condition of anonymity because the proposal hasn’t been made public. The central bank “currently” has no plans to raise compulsory reserve ratios, it said in a statement posted on its website today.

Vietnam has lagged behind nations from China to India in raising interest rates and reserve ratios to tackle inflation, which reached a 22-month high of 11.75 percent. The nation’s credit rating, already at so-called junk levels, was lowered by Moody’s Investors Service and Standard & Poor’s last month, spurring officials to consider steps to counter economic risks.

“Inflation’s an urgent problem,” Matthew Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co., said by telephone today. “Increasing reserve ratios will help at the margins, but to improve confidence and get the story back on track, raising a broad-based blunt tool like the interest rate is the best way to do it.”

The Vietnamese dong closed at 19,499 per dollar, weakening 0.05 percent, the most since Oct. 22, according to data compiled by Bloomberg. That compares with 19,099 before the most recent devaluation in August.

Black Market

On the so-called black market, the dong traded in a range of 21,090 to 21,150 this afternoon at money changers and gold shops in Ho Chi Minh City, according to a telephone information service run by the state-owned Vietnam Posts & Telecommunications Group.

The dong’s 12-month non-deliverable forwards closed at 22,910.53 a dollar as of 6 p.m. local time. They reached 23,028.14 per dollar in intraday trading.

Most Asian currencies have advanced in the past two years as the region led the global economic recovery and spurred an influx of overseas capital. Indonesia’s rupiah has soared 20 percent, Thailand’s baht 15 percent and Malaysia’s ringgit 14 percent. The dong has tumbled about 10 percent.

Vietnam’s bank reserve ratios may be increased to as high as 10 percent for dollar deposits, and about 7 percent for dong deposits, the official said. They currently range from 2 percent to 4 percent for dollar deposits and 1 percent to 3 percent for dong deposits, according to the central bank’s website.

Reducing Costs

Other measures in the proposal include steps to bring down interest rates at commercial banks to reduce costs for companies so they can lower prices, the official said.

“Inflation management needs to be the number-one priority,” said Prakriti Sofat, an economist at Barclays Capital in Singapore. Sofat added that raising bank reserve requirements would need to be followed up with interest-rate increases and efforts to support the nation’s sinking currency.

The increase in reserve ratios for U.S. dollar deposits would additionally help to boost Vietnam’s foreign-exchange reserves, the official said. The reserves were at a “low” level at the end of September, covering 1.8 months of imports, the International Monetary Fund said last month.

State Bank of Vietnam Governor Nguyen Van Giau declined to comment on the proposal when contacted by Bloomberg News today.

Policy Direction

Vietnam’s Communist Party is scheduled to open a quinquennial meeting next week, a gathering that may help set direction for policy. VnExpress reported last month that the trade ministry wants the central bank to cut interest rates to support companies.

Vietnam’s weakening exchange rate has contributed to inflation by raising the cost of imported goods. The government has had to devalue the nation’s currency three times in the past 14 months, reflecting a lack of sufficient inflows of foreign capital to offset the nation’s trade deficit, which totaled $12.4 billion last year.

Moody’s said policy makers have been unwilling to tighten monetary policy effectively when it lowered the credit rating on Dec. 15. S&P said a credit boom and economic volatility had weakened the balance sheet of the country’s banks.

Vietnam’s long-term foreign-currency rating is now B1 at Moody’s, four steps below investment grade. It’s an equivalent B+ at Fitch Ratings after a cut in July, and one level higher at BB- at S&P.

Accelerating Growth

Dung’s government has favored stoking economic expansion over steps to rein in inflation, with growth accelerating to a year-on-year pace of 7.34 percent in the fourth quarter, adding pressure on the central bank to curb the jump in lending and prevent overheating.

The Vietnamese government’s actions often give an “impression” that it favors short-term growth “despite official statements to the contrary,” Masato Miyazaki, the IMF’s division chief for the Asia and Pacific department, said in December.

The State Bank of Vietnam two months ago raised its so- called base rate to 9 percent from 8 percent, the first increase in almost a year.

The government is targeting an increase in gross domestic product of about 7 percent in 2011 and doesn’t expect inflation to exceed 7 percent.

--Nguyen Dieu Tu Uyen, K. Oanh Ha. Editor: Sunil Jagtiani, Stephanie Phang

%VND

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net.

To contact the editors responsible for this story: K. Oanh Ha in Hanoi at oha3@bloomberg.net; Stephanie Phang in Singapore at sphang@bloomberg.net

Gold Falls to Five-Week Low on Stronger Dollar, Recovery Signs

Posted: 07 Jan 2011 03:41 AM PST

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By Nicholas Larkin and Sungwoo Park

Jan. 7 (Bloomberg) -- Gold dropped for a fifth day in London, falling to a five-week low, as signs the U.S. economy is recovering and a stronger dollar curbed investment demand. Other precious metals declined.

The dollar climbed to the highest level since September against the euro before a U.S. report that may show employers added jobs for a third month. A fifth daily drop for gold would be the longest losing streak since August 2009. The metal reached a record $1,431.25 an ounce last month.

“Investors are selling gold due to a stronger dollar,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “It is of course less safe-haven demand that is playing a role. The market is now looking for a very strong rise” in U.S. payrolls, he said.

Immediate-delivery bullion lost as much as $14.80, or 1.1 percent, to $1,356.80 an ounce, the lowest level since Nov. 29, and was at $1,358.43 at 11:20 a.m. in London. Prices are down 4.4 percent this week, the most since May. The metal for February delivery was 1 percent lower at $1,358.40 on the Comex in New York.

Bullion fell to $1,358 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,368.50 at yesterday’s afternoon fixing.

Gold jumped 30 percent last year after governments spent trillions of dollars and kept interest rates low to bolster economies following the worst global recession since World War II. Precious-metals prices rose as investors lost confidence in currencies and became more concerned about the fiscal health of euro-region countries including Ireland.

U.S. Jobs

Economists have raised forecasts for the number of jobs added by U.S. employers in December after a report this week showed the biggest jump in company payrolls since records began in 2001. The median forecast in a Bloomberg News survey calls for a 150,000 gain last month, ahead of today’s data from the Labor Department. Reports this week showed orders placed with factories and manufacturing improved in the U.S.

“We will see some weakness in gold prices in the short term because we are seeing signs that the U.S. economy is certainly in some form of improving trend,” David Lennox, a resource analyst at Fat Prophets, said from Sydney today.

Eleven of 20 traders, investors and analysts surveyed by Bloomberg, or 55 percent, said that gold will decline next week. Eight predicted higher prices and one was neutral.

Gold assets in exchange-traded products were little changed at 2,091.65 metric tons yesterday, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,114.6 tons on Dec. 20. Silver assets fell 25.16 tons to 15,080.07 tons, data from four providers show.

Silver for immediate delivery in London dropped 2.3 percent to $28.42 an ounce. The metal is down 8.1 percent this week, the most since May, after jumping 83 percent last year.

Palladium slid 2.2 percent to $745.13 an ounce. It was the best-performing precious metal last year with a surge of 97 percent. It’s down 7.1 percent this week, the biggest drop since July. Platinum was 0.4 percent lower at $1,724.25 an ounce, taking its weekly loss to 2.6 percent.

--Editor: John Deane

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Sungwoo Park in Seoul at spark47@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

Bond Sales Set Record as GE Leads $48.2 Billion: Credit Markets

Posted: 07 Jan 2011 03:35 AM PST

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By Tim Catts and Sapna Maheshwari

Jan. 7 (Bloomberg) -- Company bond sales in the U.S. hit a record this week and relative yields on investment-grade debt shrank to the narrowest since May as money managers boosted bets economic growth is gaining momentum.

Issuance soared to $48.2 billion, eclipsing the $46.9 billion raised in the week ended May 8, 2009, as General Electric Co.’s finance unit sold $6 billion of notes in the largest offering in 11 months, according to data compiled by Bloomberg. Investment-grade bond spreads narrowed to 162 basis points, or 1.62 percentage points, more than Treasuries, Bank of America Merrill Lynch index data show.

Appetite for corporate debt is growing after annual sales topped $1 trillion for the second consecutive year as the securities return more than Treasuries. Claims for jobless benefits declined to the lowest level since July 2008 and service industries expanded at the fastest pace since May 2006, signaling the U.S. economy is poised to accelerate.

“We’ve had a lot of good news come up economically, at least within the U.S., so that’s put some wind behind the sails,” said Thomas Chow, who helps oversee $120 billion of fixed-income assets at Philadelphia-based Delaware Investments.

Foreign borrowers dominated U.S. sales this week, with companies from Sydney-based Macquarie Group Ltd. to the U.K.’s Barclays Plc accounting for 57 percent of the total, Bloomberg data show.

Relative yields on U.S. corporate bonds became narrower than those on company debt worldwide last month for the first time on record, Bank of America Merrill Lynch index data show. Spreads on company bonds worldwide were unchanged at 166 basis points yesterday, while yields averaged 3.937 percent, the bank’s Global Broad Market Corporate Index shows.

Moody’s Forecast

Elsewhere in credit markets, Moody’s Corp. boosted its 2010 earnings forecast for the second time in less than three months because of “robust” bond issuance. The cost of protecting European corporate debt against default rose the most since June, and leveraged loan prices increased for a ninth day, to the highest in almost two years.

Moody’s expects full-year earnings per share to range from $2.08 to $2.14, compared with a previous forecast of $1.90 to $1.96, the New York-based company said yesterday in a statement. It earlier raised the guidance on Oct. 28 after reporting a 35 percent jump in third-quarter earnings. Five analysts surveyed by Bloomberg estimated profit of $1.93 per share.

“The updated guidance is driven by a higher revenue forecast associated with robust fourth-quarter bond market issuance,” the ratings company said in the statement.

GE Bonds

Bonds from Fairfield, Connecticut-based GE were the most actively traded U.S. corporate securities by dealers, with 217 transactions of $1 million or more, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The offering by GE Capital was the largest in the U.S. since Feb. 4, 2010, when Kraft Foods Inc. sold $9.5 billion of bonds and Berkshire Hathaway Inc. issued $8 billion of debt, Bloomberg data show.

In London, the Markit iTraxx Financial Index of swaps on 25 European banks and insurers rose as much as 6 basis points to 203, the highest level since March 2009, according to JPMorgan Chase & Co. The gauge was trading at 192 basis points at 11:30 a.m. in London.

Belgium, Ireland Risk

Belgium and Ireland led a surge in the cost of insuring against default on European government debt, according to CMA. Credit-default swaps on Belgium jumped 14 basis points to a record 249 and Ireland increased 6 to an all-time high 646. That helped push the Markit iTraxx SovX Western Europe Index up 1 basis point to a record 214.

Contracts on Portugal rose 9 basis points to 534, the highest level since Nov. 30. Spain increased 7 basis points to 355.5, Italy climbed 10 to 252 and Greece was up 8.5 at 1,034.

Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The Standard & Poor’s/LSTA US Leveraged Loan 100 Index rose 0.2 cent to 93.7 cents on the dollar yesterday, the highest since Jan. 16, 2008. The index tracks the 100 largest dollar- denominated first-lien leveraged loans, which are usually rated below Baa3 by Moody’s and BBB- by S&P.

U.S. commercial paper outstanding declined $3.3 billion to $965.7 billion in the week ended Jan. 5, the Federal Reserve said yesterday on its website. That’s the lowest for seasonally adjusted data compiled by Bloomberg going back to 2000.

Yankee Issues

In emerging markets, relative yields rose 8 basis points to 227 basis points, the first increase this week, according to JPMorgan Chase & Co. index data.

Macquarie Group, Barclays, Sumitomo Mitsui Banking Corp. and Deutsche Bank AG led $27.4 billion of offerings from foreign banks this week, Bloomberg data show.

“The expectation coming into this year was that Yankee issuance would be heavy,” said Jim Probert, managing director and head of investment grade capital markets at Bank of America Merrill Lynch. “There’s enough maturing debt coming out of European financials in particular that they needed to be in the marketplace, and right now, U.S. dollars is a good alternative, in addition to euros.”

Debt Crisis

European banks are competing for investors after the region’s sovereign debt crisis drove borrowing costs for the most indebted governments to the highest on record.

Investors are paying up to own investment-grade corporate debt even after the securities tumbled in November and December, leading to the worst quarter since the three months ended September 2008, Bank of America Merrill Lynch index data show. Investment-grade corporate bonds lost 1.6 percent in the fourth quarter, compared with a loss of 2.7 percent for Treasuries, the index data show.

Yields on the 10-year Treasury jumped 50 basis points last month to 3.29 percent on Dec. 31 and ended at 3.39 yesterday.

“Whenever you get a back-up in rates, you get more people coming in to buy bonds,” said Timothy Cox, an executive director of debt capital markets at Mizuho Securities USA in New York. “The overall demand is still exceptional and we think it’s going to remain strong going forward.”

Absolute yields on investment-grade corporate securities have increased to 4.22 percent from 3.87 percent on Nov. 30, Bank of America Merrill Lynch index data show. Spreads on the debt have shrunk 19 basis points to the tightest since touching 160 on May 4.

‘Yield Opportunities’

Financing costs remain “pretty attractive” to chief financial officers even as yields rise, said Tom Murphy, a money manager who helps oversee more than $22 billion of investment- grade credit at Columbia Management in Minneapolis.

“If you’re a treasurer or CFO and you kind of block out what’s happened over the last six weeks and just take a look at the longer-term yield opportunities in the marketplace, the yields are still well below their long-term averages,” said Murphy, who expects $75 billion of investment-grade issuance this month.

Investment-grade debt yields were 4.75 percent a year ago, Bank of America Merrill Lynch index data show.

Berkshire, the Omaha, Nebraska-based holding company led by billionaire investor Warren Buffett, this week sold $1.5 billion of mostly fixed-rate debt to retire floating-rate notes to lock in interest rates.

Jobless Benefits

The average number of applications for jobless benefits over the past four weeks dropped to 410,750, the lowest level since July 2008, Labor Department figures showed yesterday in Washington. The Institute for Supply Management’s non-factory index, which covers about 90 percent of the economy, rose to 57.1, exceeding the median forecast of economists surveyed by Bloomberg News, from 55 in November. A reading greater than 50 signals growth.

Toyota Motor Credit Corp., the U.S. finance unit of the world’s largest automaker, issued $1.6 billion of debt, including five-year notes with a relative yield 50 basis points narrower than in its previous offering of debt with that maturity, according to data compiled by Bloomberg.

“Just back from the holidays and with some encouraging news on the economic front, we found market conditions to be positive,” said Steve Howard, head of capital markets and derivatives at Toyota Motor Credit. “Investors continue to see value in our name and as such, our transaction was met with robust demand.”

--With assistance from Alexandra Harris in New York. Editors: Mitchell Martin, Cecile Gutscher

To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; Sapna Maheshwari in New York at smaheshwar11@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net