Swiss National Bank will cut interest rate to minus 0.25%

Switzerland's National Bank (SNB) will bring in a negative interest rate cutting the value of large sums of money left on deposit in the country. 

The Bank is imposing a rate of minus 0.25% on "sight deposits" - a form of instant access account - of more than 10m Swiss francs ($9.77m). 

It is trying to lower the value of the Swiss franc, which has risen recently. 

Russia's market meltdown and a dramatic plunge in the oil price have led investors to seek "safe havens".

 Deflation Warning Sounds as 2-Year Break-Even Rates Go Negative

Even with the Federal Reserve reminding investors that policy makers remain on course to raise interest rates next year, one corner of the bond market is warning of the risk of deflation.

The difference in yields between Treasury two-year notes and comparable maturity inflation-indexed securities turned negative yesterday for the first time since the aftermath of the global financial crisis in 2009. The measure, known as the break-even rate, is generally seen as reflecting investors’ expectations for inflation over the life of the securities. 

The negative break-even rate represents “an uncertainty premium that maybe oil could fall to $40 a barrel,” said Donald Ellenberger, who oversees about $10 billion as head of multi-sector strategies at Federated Investors in Pittsburgh. “The shortest-term TIPS are very influenced by the direction of the consumer price index. It’s telling you inflation on the short-end could turn negative.”

Dollar surge endangers global debt edifice, warns BIS

Bank for International Settlements concerned about underlying health of world economy as dollar loans to emerging markets increase rapidly

Off-shore lending in US dollars has soared to $9 trillion and poses a growing risk to both emerging markets and the world's financial stability, the Bank for International Settlements has warned. 

The Swiss-based global watchdog said dollar loans to Chinese banks and companies are rising at annual rate of 47pc. They have jumped to $1.1 trillion from almost nothing five years ago. Cross-border dollar credit has ballooned to $456bn in Brazil, and $381bn in Mexico. External debt has reached $715bn in Russia, mostly in dollars. 

Cross-border lending in dollars has tripled to $9 trillion in a decade. Some $7 trillion of this is entirely outside the American regulatory sphere. "Neither a borrower nor a lender is a US resident. The role that the US dollar plays in debt contracts is very important. It is a global currency, and no other currency has this role," he said. 

The implication is that there is no lender-of-last resort standing behind trillions of off-shore dollar bank transactions. This increases the risks of a chain-reaction if it ever goes wrong. China's central bank has ample dollar reserves to bail out its companies - should it wish to do so - but the jury is out on Brazil, Russia, and other countries.

It now warns that the world is in many ways even more stretched today than it was in 2008, since emerging markets have been drawn into the global debt morass as well, and some have hit the limits of easy catch-up growth. 

Debt levels in rich countries have jumped by 30 percentage points since the Lehman crisis to 275pc of GDP, and by the same amount to 175pc in emerging markets. The world has exhausted almost all of its buffer.

The repurchase revolution

Companies have been gobbling up their own shares at an exceptional rate. There are good reasons to worry about this.

IN THE decade before America’s housing bubble burst, Home Depot, an American home-improvement chain, spent heavily on building new shops to meet rampant demand for everything from taps to timber. For every dollar of operating cashflow the firm generated, it ploughed back 65 cents into capital investment. The financial crisis hit hard, and demand for some products has yet to recover fully. Sales of kitchens are only 60% of their peak level. But Home Depot has evolved into a very different kind of beast. Its capital investment has fallen by two-thirds and it is investing heavily in something else: its own shares. Yet share repurchases also have many critics. They fall into two camps. Some view buy-backs as a form of financial sorcery, on a par with all those abstruse credit derivatives that helped cause the financial crisis. Others accept that buy-backs are a legitimate way to return cash to shareholders but worry about their extent. They fear they have become a kind of corporate cocaine that induces a temporary feeling of invincibility but masks weakness and vacuity. They worry the boom will damage firms and the economy. “You have to save shareholders from themselves,” says the finance chief of one of the world’s biggest multinationals, who thinks there may be a buy-back bubble. Jim Chanos, a short-seller who helped expose the Enron scandal, says the rate at which firms are repurchasing their shares is reckless.

Surprise! Guess which currency has stronger fundamentals - the dollar or… ruble?Simon Black

Facebook’s Popularity Among Teens Dips Again

One reason for the decline in teen Facebook usage is due to concerns that the service may not be trustworthy. Just 9 percent of those surveyed described the website as “safe” or “trustworthy,” while almost 30 percent of people said they would use those words to describe Pinterest. Pinterest also ranked higher in “fun,” with 40 percent saying so compared with 18 percent for Facebook. 

“Facebook has been so deeply embedded in the lives of the people that the fade is going to be slow,” Kuittinen said. “People just start being vaguely dissatisfied and then after a while they stop using it.”

DYI