Stake – Cash Back and Banking Services for Renters –  Raises $12 Million in Series A Funding

NEW YORK–(BUSINESS WIRE)–Stake, which provides Cash Back and banking services to renters, announced today the completion of its $12 million Series A financing round. With Stake, renters earn Cash Back when they take positive actions, like signing a lease and paying rent. Owners save money with every renter action.

The round was led by RET Ventures, which selected Stake as one of the first investments for the new RET Ventures ESG Fund (the “Housing Impact Fund”). Participation also included: Enterprise Community Partners, which, since 1982, has helped create or preserve 873,000 homes; Hometeam Ventures; Operator Stack; and Second Century Ventures, the investment arm of the National Association of Realtors. Existing investors Shadow Ventures and Olive Tree Ventures also participated in the round.

Today more than 44 million American households pay rent every month, and from 1985 to 2020, median rent prices increased by nearly 150% despite income growing just 35%. Leveraging behavioral science, Stake was founded in 2018 to empower renters by providing them with Cash Back on their rent as well as no-fee banking services to build savings. Stake also mitigates pain points for building owners, increasing lease-ups, reducing economic vacancy, improving maintenance, and increasing ancillary revenue.

Using Stake, property managers receive a 130% return on every dollar spent. Renters earn an average of 4% Cash Back on their rent each month. Across the $385 million in annual leases connected to the platform, 65% of renters have more money in their Stake account than any other banking account. In the past year, the number of residences that offer Cash Back with Stake has grown by 10x.

“Renters don’t need more debt or loans,” noted Rowland Hobbs, Co-Founder and CEO of Stake. “What renters need is money to help with everyday essentials and to establish long-term savings. With Stake, we have reimagined the classic ‘rainy day fund’ for renters to build the sort of wealth traditionally associated with home ownership. Now, their largest expense is also their largest source of savings.”

The new funding round will enable Stake to continue building out its financial infrastructure and suite of solutions that address difficult issues for renters and property owners alike.

“Stake’s approach to housing affordability is perfectly aligned with the mission of our ESG-centric fund,” said John Helm, partner at RET Ventures, who will join Stake’s board. “While a slew of platforms offer renters innovative payment options, they are all credit or debt-based. They ultimately encourage dangerous behaviors as part of their proposed solution. Stake flips the script on this model by offering a risk-free, renter-centric, efficient, and easy-to-use pathway toward building wealth.”

“Unlike homeowners, renters rarely reap financial benefits from paying for their homes – and families who rent tell us they could use a little extra cash each month. This is why Stake’s goal of empowering more economically resilient renters through cash back and no-fee banking services resonated with us,” said Enterprise Community Partners President and CEO Priscilla Almodovar. “It’s not just a good deal for renters. It makes sense for landlords, too, who are more likely to retain residents, which in turn strengthens communities.”

About Stake

Stake is building the financial infrastructure for the next generation of rentals. Stake aligns incentives between renters, operators, owners, and investors, so everyone earns the Return on Rent™ they deserve. Stake’s revenue management tools outperform, returning 130% on every dollar spent. These savings return millions of dollars to renters each year in the Stake app. Thousands of renters use Stake to earn Cash Back, grow their savings, and access free and equitable banking services. Headquartered in New York City and Seattle, Stake is on a mission to empower wealthier, happier, and more resilient renters. For more information, please visit https://www.stake.rent/

About RET Ventures

A leading real estate technology investment firm, RET Ventures is the first industry-backed, early-stage venture fund strategically focused on building cutting-edge “rent tech” — technology for multifamily and single-family rental real estate. RET invests out of core venture funds and a Housing Impact Fund, backing companies that address a range of pain points for real estate operators. Through its deep expertise and connections, RET provides solutions to issues ranging from housing affordability and sustainability to risk management and operational efficiency. The firm’s Strategic Investors include some of the largest REITs and private real estate owner-operators and managers, who control approximately 2.4 million rental units worth $600 billion. For more information, please visit www.ret.vc

About Enterprise Community Partners

Enterprise is a national nonprofit that exists to make a good home possible for the millions of families without one. We support community development organizations on the ground, aggregate and invest capital for impact, advance housing policy at every level of government, and build and manage communities ourselves. Since 1982, we have invested $54 billion and created 873,000 homes across all 50 states, the District of Columbia and Puerto Rico – all to make home and community places of pride, power and belonging. Join us at enterprisecommunity.org.

*Stake is a financial technology company and is not a bank. Banking services provided by Blue Ridge Bank N.A; Member FDIC. The Stake Visa® Debit Card is issued by Blue Ridge Bank N.A. pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

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West Seeks a More Effective Way to Tighten Sanctions on Russia

Credit…Maxim Shemetov/Reuters

Russia missed a deadline for making bond payments on Sunday, a move signaling its first default on international debt in more than a century, after Western sanctions thwarted the government’s efforts to pay foreign investors. The lapse adds to efforts to seal Moscow off from global capital markets for years.

About $100 million in dollar- and euro-denominated interest payments failed to reach investors within a 30-day grace period after a missed May 27 deadline. The grace period expired Sunday night.

A formal declaration of default would need to come from bondholders because ratings agencies, which normally declare when borrowers have defaulted, have been barred by sanctions from reporting on Russia. The Credit Derivatives Determinations Committee, a panel of investors that rules on whether to pay out securities linked to defaults, hasn’t been asked to make a decision on these bond payments yet.

But it appeared that the payments had not reached bondholders’ accounts as of Sunday night, as required by the bonds’ contracts. On Monday, Russia’s finance ministry said that it had made the payments in May and that they had been transferred to Euroclear, a Brussels-based clearinghouse, but subsequently blocked from reaching bondholders.

Russia is rejecting the default declaration, on the grounds that it has made efforts to pay. Dmitri S. Peskov, the Kremlin’s spokesman, told reporters on Monday that the statements about default were “absolutely illegal.”

“The fact that Euroclear withheld this money, did not transfer it to the recipients, it is not our problem,” Mr. Peskov said. “In other words, there are no grounds to call this situation a default.”

The finance ministry added that the actions of foreign financial institutions were beyond its control and that “it seems advisable for investors to contact the relevant financial institutions directly” over the payments.

Euroclear declined to comment.

“We can expect Russia to stick to its alternative narrative: The default isn’t a default, we tried and it isn’t our fault,” said Tim Samples, a legal studies professor at the University of Georgia’s Terry College of Business and an expert on sovereign debt, adding that Russia also hasn’t submitted to jurisdiction in foreign courts. Still, “that has to be a bit humiliating, even for a country that can survive and maintain a war on its hydrocarbon revenues,” he said.

The risk of default emerged in late February after Russia invaded Ukraine and sanctions were imposed to sever the country from international financial markets. In late May, Russia tried to navigate tightening sanctions that cut off its access to American banks and bondholders by sending the payments to a Moscow-based institution. But ultimately, the funds didn’t make it all the way to bondholders’ accounts because of far-reaching American and European sanctions.

News of Monday’s apparent default showed “just how strong” international sanctions against Russia have been, a senior U.S. administration official said in a background briefing for reporters at the Group of 7 summit in Germany, highlighting the “dramatic” effect on Russia’s economy.

This default is unusual because it’s a result of economic sanctions blocking transactions, not because the Russian government has run out of money. Moscow’s finances remain resilient after months of war, with nearly $600 billion in foreign currency and gold reserves, though about half of that is frozen overseas. And Russia continues to receive a steady influx of cash from sales of oil and gas. Still, a default would be a stain on the country’s reputation that will linger in investors’ memories and probably push up its borrowing costs if it is able to tap international capital markets.

Unlike other major defaults in recent history, such as in Greece and Argentina, this default is expected to have a relatively small impact on international markets and Russia’s budget. For one thing, Russia has already lost access to international investors, traditionally the worst consequence of default.

“The only clear negative outcome of the default is that the external market will be effectively closed for the ministry of finance,” said Sofya Donets, an economist at Renaissance Capital in Moscow. “But it’s already closed.”

The head of Russia’s central bank, Elvira Nabiullina, said this month that there wouldn’t be any immediate consequences of a default because there had already been an outflow of investors and a drop in the value of Russia’s assets. The central bank is more concerned about inflation, most recently at about 17 percent, and supporting the economy through a “large-scale structural transformation” after an exodus of foreign companies and imports.

The Western sanctions alone are expected to block Russia from large parts of international capital markets for a long time. Regardless, Russia has been reluctant to give up its reputation as a reliable borrower, which was hard won after its economic collapse in 1998, when the government defaulted on ruble-denominated bonds amid a currency crisis.

Last month, Russia insisted that it had fulfilled its debt obligations by sending funds to its payment agent in Moscow, the National Settlement Depository. Since then, the depository has fallen under European sanctions, further restricting Russia’s ability to pay bondholders. The finance minister, Anton Siluanov, has accused the West of artificially manufacturing a default and has threatened legal action against U.S. authorities.

This is Russia’s first major default on foreign debt since 1918, soon after the Bolshevik Revolution.

On Wednesday, President Vladimir V. Putin signed a decree saying that future payments to holders of debt denominated in dollars or euros would be made through Russian financial institutions and that the obligations would be considered met if paid in rubles and converted. Most of the bond contracts don’t allow for payment in rubles.

Over the following two days, nearly $400 million in dollar-denominated debt payments were due from bonds that had 30-day and 15-day grace periods. The finance ministry said it had sent the payments, in rubles, using the new procedure laid out by the presidential decree. But it remains unclear how foreign investors will gain access to the funds.

Overseas investors held about half of Russia’s $40 billion in outstanding foreign-currency debt at the end of last year. As the risk of default grew this year, PIMCO, the investment management firm, saw the value of its Russian bond holdings decline by more than $1 billion, and pension funds and mutual funds with exposure to emerging market debt have also experienced declines.

But exposure to Russian assets is limited in the United States and Europe because sanctions imposed since Russia’s annexation of Crimea in 2014 have discouraged investors who didn’t want the geopolitical risk.

By international standards, Russia doesn’t have that much debt. Its public debt was only about 17 percent of gross domestic product last year, according to the International Monetary Fund, one of just a handful of countries with debt ratios under 25 percent. The United States, whose assets are in demand among global investors and deemed low risk, has a debt ratio of 125 percent of G.D.P.

Russia’s low debt levels are partly a result of “this new geopolitical era” since the annexation of Crimea, Ms. Donets said. “But it’s also a product of the default of 1998,” she added, when “the ministry of finance was burned badly.” Since then, the ministry has not been that active in issuing new foreign-currency debt, she said.

Russia hasn’t relied on borrowing from international investors for its budget. The finance ministry hasn’t issued dollar-denominated debt since 2019, when U.S. sanctions barred American banks from buying the debt directly. It last issued euro-denominated debt in May 2021.

Instead, Russia has depended on its oil and gas exports, and those dollar revenues that went into reserves and grew the national wealth fund.

“Why would you borrow and pay additional rates when you are a country that is accumulating oil funds, accumulating in hard currency, a country which has $600 billion in reserves?” Ms. Donets said.

The war hasn’t changed that calculation. Russia’s current account surplus, a broad measure of trade and investment, has soared as revenues from energy exports jumped, capital controls stopped investments fleeing and sanctions slashed imports. It has helped push the ruble to its highest level in seven years.

If Russia does issue more debt, it will lean on local banks and residents in the short term to buy ruble-denominated bonds.

Russia “will have no access to the capital markets until the war stops and the sanctions are lifted,” said Richard Portes, an economics professor at the London School of Business.

The long-term consequences of a default are unclear because of the unusual nature of the financial breach. But it’s possible to envision a future where Russia is able to sell debt on international markets again, analysts say, if the war ends and Russia’s geopolitical ambitions change. Without Mr. Putin and with hundreds of billions of dollars in international reserves unfrozen, it could return to markets.

“Capital market access can be restored very quickly,” Mr. Portes said. “Once Russia is back in good political graces and sanctions are lifted.”

“If it’s not a political pariah, it won’t be an economic pariah,” he added.

Reporting was contributed by Ivan Nechepurenko, Andrés R. Martínez, Jim Tankersley and Alan Rappeport.

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Crisis-hit Sri Lanka shuts schools, urges work from home to save fuel

  • Fuel stocks set to run out in days without curbs
  • Supplies only to essentials from Tuesday untl July 10
  • Regulator hopes to keep power cuts at 3-4 hrs/daily for 2 months

COLOMBO, June 27 (Reuters) – Sri Lanka will shut schools and only allow fuel supplies to services deemed essential like health, trains and buses for two weeks starting Tuesday, a minister said, in a desperate attempt to deal with a severe shortage.

Sri Lanka is suffering its worst economic crisis, with foreign exchange reserves at a record low and the island of 22 million struggling to pay for essential imports of food, medicine and, most critically, fuel.

Industries like garments, a big dollar earner in the Indian Ocean nation, are left with fuel for only about a week to 10 days. Current stocks of the country will exhaust in just under a week based on regular demand, Reuters calculations show.

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Sri Lanka will issue fuel only to trains and buses, medical services and vehicles that transport food starting Tuesday until July 10, Bandula Gunewardena, the spokesman for the government cabinet, told reporters.

Schools in urban areas will be shut and everyone is urged to work from home, he said. Inter-provincial bus service will be limited.

“Sri Lanka has never faced such a severe economic crisis in its history,” Gunewardena said.

Autorickshaw driver W.D. Shelton, 67, said he had waited in line for four days for fuel.

“I haven’t slept or eaten properly during this time,” he said. “We can’t earn, we can’t feed our families.”

PEOPLE TRY TO FLEE

The government is talks with the International Monetary Fund (IMF) on a possible bailout, but many people can’t wait that long and demand for passports has surged. read more

The navy in the early hours of Monday arrested 54 people off the eastern coast as they tried to leave by boat, a spokesman said, on top of 35 “boat people” held last week.

Embattled President Gotabaya Rajapaksa’s elder brother resigned as prime minister last month after clashes between pro- and anti-government protesters spiralled into countrywide violence that left nine dead and about 300 people injured.

An escalation of the fuel shortage could lead to a fresh wave of demonstrations.

Opposition leader Sajith Premadasa called for the government to step down.

“The country has collapsed completely due to the fuel shortage,” he said in a video statement. “The government has lied to the people repeatedly and has no plan on how to move forward.”

POWER CUTS

The government fuel stockpile stands at about 9,000 tonnes of diesel and 6,000 tonnes of petrol, the power minister said on Sunday, but no fresh shipments are due.

Lanka IOC (LIOC.CM), the local unit of Indian Oil Corporation (IOC.NS), told Reuters it had 22,000 tonnes of diesel and 7,500 tonnes of petrol, and was expecting another 30,000 tonnes shipment of petrol and diesel combined around July 13.

Sri Lanka consumes about 5,000 tonnes of diesel and 3,000 tonnes of petrol a day just to meet its transport requirements, Lanka IOC chief Manoj Gupta told Reuters.

Other big consumers are industries like apparel and textiles companies, whose exports jumped 30% to $482.7 million in May, according to data released on Monday.

“We have enough fuel for the next seven to ten days, so we are managing,” said Yohan Lawrence, secretary general of the Sri Lanka Joint Apparel Associations Forum.

“We are watching and waiting to see if fresh fuel stocks arrive and what will happen in the coming days.”

Sri Lanka’s power regulator said the country was using its last stocks of furnace oil to run multiple thermal power plants and keep power cuts to a minimum. Scheduled power cuts will rise to three hours from Monday from two and a half hours earlier.

“We are hoping to keep power cuts at three to four hours for the next two months,” said Janaka Ratnayake, chairman of the Public Utilities Commission of Sri Lanka. “But given the situation of the country this could change.”

An IMF team is visiting Sri Lanka for talks on a $3 billion bailout package. The country is hoping to reach a staff-level agreement before the visit ends on Thursday, that is unlikely to unlock any immediate funds. read more

It has received about $4 billion in financial assistance from India and the Sri Lankan government said on Monday the United States had agreed to provide technical assistance for its fiscal management.

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Reporting by Uditha Jayasinghe; Additional reporting by Waruna Karunatilake; Writing by Uditha Jayasinghe and Krishna N. Das; Editing by Clarence Fernandez, Nick Macfie and Deepa Babington

Our Standards: The Thomson Reuters Trust Principles.

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Banking body urges decisive wave of global rate hikes to stem inflation

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Plastic letters arranged to read “Inflation” are placed on U.S. Dollar banknote in this illustration taken, June 12, 2022. REUTERS/Dado Ruvic/Illustration

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LONDON, June 26 (Reuters) – The world’s central bank umbrella body, the Bank for International Settlements (BIS), has called for interest rates to be raised “quickly and decisively” to prevent the surge in inflation turning into something even more problematic.

The Swiss-based BIS has held its annual meeting in recent days, where top central bankers met to discuss their current difficulties and one of the most turbulent starts to a year ever for global financial markets.

Surging energy and food prices mean inflation in many places is now its hottest in decades. But the usual remedy of ramping up interest rates is raising the spectre of recession, and even of the dreaded 1970s-style “stagflation”, where rising prices are coupled with low or negative economic growth.

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“The key for central banks is to act quickly and decisively before inflation becomes entrenched,” Agustín Carstens, BIS general manager, said as part of the body’s post-meeting annual report published on Sunday.

Carstens, former head of Mexico’s central bank, said the emphasis was to act in “quarters to come”. The BIS thinks an economic soft landing – where rates rise without triggering recessions – is still possible, but accepts it is a difficult situation.

“A lot of it will depend on precisely on how permanent these (inflationary) shocks are,” Carstens said, adding that the response of financial markets would also be crucial.

“If this tightening generates massive losses, generates massive asset corrections, and that contaminates consumption, investment and employment – of course, that is a more difficult scenario.”

World markets are already suffering one of the biggest sell-offs in recent memory as heavyweight central banks like the U.S. Federal Reserve – and from next month the ECB – move away from record low rates and almost 15 years of back-to-back stimulus measures.

Global stocks (.MIWD00000PUS) are down 20% since January and some analysts calculate that U.S. Treasury bonds, the benchmark of world borrowing markets, could be having their biggest losing first half of a year since 1788.

CREDIBILITY

Carstens said the BIS’s own recent warnings about frothy asset prices meant the current correction was “not necessarily a complete surprise”. That there hadn’t been “major market disruptions” so far was also reassuring, he added.

Part of the BIS report published already last week said that the recent implosions in the cryptocurrency markets were an indication that long-warned-about dangers of decentralised digital money were now materialising.

Those collapses aren’t expected to cause a systemic crisis in the way that bad loans triggered the global financial crash. But Carstens stressed losses would be sizeable and that the opaque nature of the crypto universe fed uncertainty.

Returning to the macro economic picture, he added that the BIS didn’t currently expect a period of widespread stagflation to take hold.

He also said that though many global central banks and the BIS itself had significantly underestimated how quick global inflation has spiralled over the last six to 12 months, they weren’t about to lose hard-earned credibility overnight.

“Yes, you can argue a little bit here about an error of timing of certain actions and the responses of the central banks. But by and large, I think that the central banks have responded forcefully in a very agile fashion,” Carstens said.

“My sense is that central banks will prevail at the end of the day, and that would be good for their credibility.”

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Reporting by Marc Jones; Editing by David Holmes

Our Standards: The Thomson Reuters Trust Principles.

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Bitcoin Plummets Below $20,000 for First Time Since Late 2020

Square, another payments company, bought $50 million of Bitcoin and changed its name to Block, in part to signify its work with blockchain technology. Tesla bought $1.5 billion of it. The venture capital firm Andreessen Horowitz raised $4.5 billion for a fourth cryptocurrency-focused fund, doubling its previous one.

Excitement hit a peak in April last year when Coinbase, a cryptocurrency exchange, went public at an $85 billion valuation, a coming-out party for the industry. Bitcoin topped $60,000 for the first time.

Last summer, El Salvador announced that it would become the first country to classify Bitcoin as legal tender, alongside the U.S. dollar. The country’s president updated his Twitter profile picture to include laser eyes, a calling card of Bitcoin believers. The value of El Salvador’s $105 million investment in Bitcoin has been slashed in half as the price has fallen.

Senators and mayors around the United States began touting cryptocurrency, as the industry spent heavily on lobbying. Mayor Eric Adams of New York, who was elected in November, said he would take his first three paychecks in Bitcoin. Senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, proposed legislation that would create a regulatory framework for the industry, giving more authority to the Commodity Futures Trading Commission, an agency that crypto companies have openly courted.

Through the frenzy, celebrities fueled the fear of missing out, flogging their NFTs on talk shows and talking up blockchain projects on social media. This year, the Super Bowl featured four ads for crypto companies, including Matt Damon warning viewers that “fortune favors the brave.”

That swaggering optimism faltered this spring as the stock market plummeted, inflation soared and layoffs hit the tech sector. Investors began losing confidence in their crypto investments, moving money to less risky assets. Several high-profile projects crashed amid withdrawals. TerraForm Labs, which created TerraUSD, a so-called stablecoin, and Celsius, an experimental crypto bank, both collapsed, wiping out billions in value and sending the broader market into a tailspin.

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Europe’s central banks jack up interest rates to fight inflation surge

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  • SNB unexpectedly hikes by half a percent
  • Bank of England raises rates by 25 bps
  • Hungary unexpectedly lifts one-week deposit rate
  • Inflation painfully high and not yet peaking

BERN/LONDON, June 16 (Reuters) – Central banks across Europe raised interest rates on Thursday, some by amounts that shocked markets, and hinted at even higher borrowing costs to come to tame soaring inflation that is eroding savings and squeezing corporate profits.

Fuelled initially by soaring oil prices in the wake of Russia’s invasion of Ukraine, inflation has broadened out to everything from food to services with double digit readings in parts of the continent.

Such levels have not been seen in some places since the aftermath of the oil crisis of the 1970s.

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The Swiss National Bank and the National Bank of Hungary both caught markets off guard with big upward steps, just hours after their U.S. counterpart the Federal Reserve lifted rates by the most in almost three decades. read more

The Bank of England meanwhile lifted borrowing costs by the quarter point markets had expected. read more

The moves come just a day after the European Central Bank agreed plans in an emergency meeting to contain borrowing costs in the bloc’s south so it could forge ahead with rates rises in both July and September. read more

“We are in a new era for central banks, where lowering inflation is their only objective, even at the expense of financial stability and growth,” George Lagarias, Chief Economist at Mazars Wealth Management said.

The day’s biggest moves came in Switzerland where the SNB raised its policy rate to -0.25% from the -0.75%, a step so large, not a single economist polled by Reuters had predicted it.

The first SNB hike since 2007 is unlikely to be the last, however, and the bank could be out of negative territory this year, some economists said.

“The new inflation forecast shows that further increases in the policy rate may be necessary in the foreseeable future,” SNB Chairman Thomas Jordan told a news conference.

The Swiss franc jumped almost 1.8% against the euro on the decision and was headed for the biggest daily rise since January 2015 when the SNB unhooked the franc from its euro peg.

TIGHTROPE

In London, the Bank of England was more cautious but said it was ready to act “forcefully” to stamp out dangers posed by an inflation rate heading above 11%. read more

It was the fifth time that the BoE has raised borrowing costs since December and the British benchmark rate is now at its highest since January 2009.

Three of nine rate setters however voted for a bigger, 50 basis point increase, suggesting that the bank will be under pressure to keep raising rates, even as economic growth slows sharply.

“Central bankers are teetering along a tightrope, with the biggest concern that raising rates too quickly could tip economies into recession,” Maike Currie, Investment Director for Personal Investing at Fidelity International said.

“Monetary policy tightening is a very blunt tool to manage a very precarious situation.”

Despite the hike, sterling fell sharply as some in the market had bet on a bigger move given the Fed’s 75 basis points hike the previous evening. The weaker currency, however, means higher imported inflation and further pressure to raise rates. read more

The pound was last at $1.2085 against the dollar, down three quarters of a percent on the day.

In Budapest meanwhile, the Hungarian central bank unexpectedly raised its one-week deposit rate by 50 basis points to 7.25% at a weekly tender, also to tame stubbornly rising inflation now running in double-digits.

Barnabas Virag, the bank’s deputy governor said the increase far was from the last and the bank would continue its rate hike cycle with “predictable and decisive” steps until it sees signs that inflation is peaking, probably in the autumn.

The hike also comes as the nation’s currency has lost close to 7% of its value this year, increasing inflation further via higher import prices.

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Writing by Balazs Koranyi in Frankfurt; Additional reporting by William Schomberg in London, Krisztina Than in Budapest, Mike Shields and Silke Koltrowitz in Zurich; Editing by Toby Chopra

Our Standards: The Thomson Reuters Trust Principles.

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EXCLUSIVE Texas securities regulator is probing Celsius account freeze – official

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WASHINGTON, June 16 (Reuters) – State securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington are investigating crypto lender Celsius Network’s decision this week to suspend customer redemptions, Joseph Rotunda, enforcement director at the Texas State Securities Board told Reuters on Thursday.

Officials met and began investigating the matter first thing Monday morning, Rotunda said, adding he considered the probe to be a “priority.”

Celsius said that due to extreme market conditions, it was pausing withdrawals, swaps and transfers between accounts. The company said that doing so would put it “in a better position to honor, over time, its withdrawal obligations.” read more

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“I am very concerned that clients – including many retail investors – may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences,” he said.

Alabama Securities Commission Director Joseph Borg also told Reuters that Alabama, Texas, New Jersey and Kentucky securities regulators were probing the matter. Celsius has been responsive to questions from the regulators, but that the investigation is in the initial stages, he said.

Borg added that U.S. Securities and Exchange Commission has also been in communication with Celsius.

The SEC declined to comment. The New Jersey and Washington state securities regulators did not immediately respond to requests for comment. A spokesperson for the Kentucky Department of Financial Institutions said it was their policy to not comment on ongoing enforcement actions and investigations.

Celsius and CEO Alex Mashinsky did not immediately respond to a request for comment.

Rotunda said he and his team learned of the move by New Jersey-based Celsius to freeze user withdrawals from the company’s blog post and announcement on Twitter on Sunday night, which said the company needed to take action to “stabilize liquidity.”

In September, regulators in Kentucky, New Jersey and Texas hit Celsius with a cease and desist order, arguing its interest-bearing products should be registered as a security. In February, the SEC and those same state regulators fined BlockFi $100 million for failing to register its crypto lending product.

Similar to a bank, Celsius gathers crypto deposits from retail customers and invests them in the equivalent of the wholesale crypto market, including “decentralized finance,” or DeFi, sites that use blockchain technology to offer services from loans to insurance outside the traditional financial sector. read more

Celsius promises retail customers huge returns, sometimes as much as 18.6% annually. The lure of big profits has led individual investors to pour assets into Celsius and platforms like it.

Mashinsky said in October Celsius had $25 billion in assets. That figure had fallen to around $11.8 billion as of last month, the Celsius website showed.

Celsius appears to have stumbled on some of its wholesale crypto investments, according to public blockchain information and analysts who track such data. As those investments soured, the company was unable to meet redemptions from customers fleeing amid the broader crypto market slump, analysts said. read more

Cryptocurrencies have lost more than $400 billion since TerraUSD, a major stablecoin pegged to the U.S. dollar, collapsed in May. Bitcoin sank to an 18-month low on Wednesday to $20,079.72. It has slumped about 70% from its record high of $69,000 in November. read more

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Reporting by Hannah Lang; Editing by Richard Chang, Nick Zieminski, Michelle Price and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

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China’s holdings of U.S. Treasuries skid to 12-year low; Japan also cuts holdings

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U.S. and Chinese flags are seen in front of a U.S. dollar banknote featuring American founding father Benjamin Franklin and a China’s yuan banknote featuring late Chinese chairman Mao Zedong in this illustration picture taken May 20, 2019. REUTERS/Jason Lee/Illustration/File Photo

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NEW YORK, June 15 (Reuters) – China’s holdings of U.S Treasuries tumbled in April to their lowest since May 2010, data showed on Wednesday, with Chinese investors likely cutting losses as Treasury prices fell after Federal Reserve officials signaled sizable rate hikes to temper soaring inflation.

Chinese holdings dropped to $1.003 trillion in April, down $36.2 billion from $1.039 trillion the previous month, according to U.S. Treasury Department figures. China’s stock of Treasuries in May 2010 was $843.7 billion, data showed.

The reduction in Treasury holdings may also have been aimed at diversifying China’s foreign exchange holdings, analysts said.

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The Chinese sales contributed to a drop in overall foreign holdings of Treasuries in April that helped propel yields higher. U.S. benchmark 10-year Treasury yields started April with a yield of 2.3895% , and surged roughly 55 basis points to 2.9375% by the end of the month.

Japan’s holdings of U.S. Treasuries fell further in April to their lowest since January 2020, amid a persistent decline in the yen versus the dollar, which may have prompted Japanese investors to sell U.S. assets to benefit from the exchange rate.

Japanese holdings fell to $1.218 trillion in April, from $1.232 trillion in March. Japan remained the largest non-U.S. holder of Treasuries.

Overall, foreign holdings of Treasuries slid to 7.455 trillion, the lowest since April 2021, from $7.613 trillion in March.

On a transaction basis, U.S. Treasuries saw net foreign outflows of $1.152 billion in April, from net new foreign inflows of $48.795 billion in March. This was the first outflow since October 2021.

The Federal Reserve, at its policy meeting in March, raised benchmark interest rates by a quarter of a percentage point.

It lifted rates by 50 bps in May, but at the June policy meeting on Wednesday lifted rates by a hefty 75 bps to stem a disruptive surge in inflation. The Fed also projected a slowing economy and rising unemployment in the months to come. read more

In other asset classes, foreigners sold U.S. equities in April amounting to $7.1 billion, from net outflows of $94.338 billion in March, the largest since at least January 1978, when the Treasury Department started keeping track of this data. Foreign investors have sold stocks for four consecutive months.

U.S. corporate bonds, on the other hand, posted inflows in April of $22.587 billion, from March’s $33.38 billion, the largest since March 2021. Foreigners were net buyers of U.S. corporate bonds for four straight months.

U.S. residents, meanwhile, decreased their holdings of long-term foreign securities, with net sales of $36.7 billion, data showed.

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Reporting by Gertrude Chavez-Dreyfuss; Editing by Paul Simao and Richard Pullin

Our Standards: The Thomson Reuters Trust Principles.

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U.S. labor market appears to cool; homebuilding slumps as rates surge

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A “Now hiring” sign is displayed on the window of an IN-N-OUT fast food restaurant in Encinitas, California, U.S., May 9, 2022. REUTERS/Mike Blake

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  • Weekly jobless claims fall 3,000 to 229,000
  • Continuing claims rise 3,000 to 1.312 million
  • Housing starts plunge 14.4% in May; permits drop 7.0%

WASHINGTON, June 16 (Reuters) – The number of Americans filing new claims for unemployment benefits fell less than expected last week, suggesting some cooling in the labor market, though conditions remain tight.

There are growing signs the Federal Reserve’s aggressive efforts to slow demand and bring down inflation to its 2% target are starting to have an impact. Homebuilding slumped to a 13-month low in May, while a gauge of factory activity in the mid-Atlantic region contracted for the first time in two years in June. read more

The U.S. central bank on Wednesday raised its policy interest rate by three-quarters of a percentage point, the biggest hike since 1994. read more

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“The Fed is getting what it wants as financial market conditions tighten and interest rate-sensitive parts of the economy respond to the removal of monetary policy accommodation,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania.

Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 229,000 for the week ended June 11, the Labor Department said. Economists polled by Reuters had forecast 215,000 applications for the latest week.

The decline left the bulk of the prior week’s jump intact, which had lifted filings close to a five-month high. California reported a surge in unadjusted claims last week. There were notable rises in Ohio and Michigan, potentially related to the auto industry. Claims also increased considerably in Illinois and Pennsylvania, but fell in Missouri.

Jobless claims

There has been a steady rise in reports of job cuts, mostly in the technology and housing sectors. Still, claims have remained locked in a tight range since plunging to more than a 53-year low of 166,000 in March.

Fed Chair Jerome Powell told reporters on Wednesday that “the labor market has remained extremely tight,” and that “labor demand is very strong.” The U.S. central bank has increased its benchmark overnight interest rate by 150 basis points since March.

There were 11.4 million job openings at the end of April. The number of people receiving benefits after an initial week of aid rose 3,000 to 1.312 million during the week ending June 4.

“For now, supply and demand mismatches will keep filings low,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “But the level could start to trend up as the Fed continues to remove policy accommodation to slow demand.”

Thursday’s data followed on the heels of news this week of a surprise decline in U.S. retail sales in May, amplifying fears of a recession.

Stocks on Wall Street tumbled. The dollar fell against a basket of currencies. U.S. Treasury yields fell.

LOSING SPEED

The housing market, the sector most sensitive to interest rates, is losing speed. But this could help to bring housing supply and demand back into alignment and lower prices.

A separate report from the Commerce Department showed housing starts plunged 14.4% to a seasonally adjusted annual rate of 1.549 million units last month, the lowest level since April 2021. Economists had forecast starts would slide to a rate of 1.701 million units.

Permits for future homebuilding declined 7.0% to a rate of 1.695 million units. A survey on Wednesday showed the National Association of Home Builders/Wells Fargo Housing Market sentiment index hit a two-year low in June, with a gauge of prospective buyer traffic falling below the break-even level of 50 for the first time since June 2020. read more

Single-family housing starts, which account for the biggest share of homebuilding, tumbled 9.2% to a rate of 1.051 million units last month, the lowest since August 2020. Starts rose in the Northeast, but fell in the Midwest, South and West regions.

housing starts and building permits

The 30-year fixed-rate mortgage jumped 55 basis points this week to a 13-1/2-year high of 5.78%, mortgage finance agency Freddie Mac reported on Thursday. That was the largest one-week increase since 1987.

“Rising rates aren’t all bad news, however,” said Jacob Channel, senior economist at LendingTree. “Though it’s unlikely that home prices will majorly slump, an increase in housing supply will likely significantly slow home price growth and give would-be buyers more housing options to chose from.”

Building permits for single-family homes declined 5.5% to a rate of 1.048 million units, the lowest since July 2020.

Starts for housing projects with five units or more dove 26.8% to a rate 469,000 units. Multi-family housing permits dropped 10.0% to a rate of 592,000 units.

The number of houses approved for construction that are yet to be started increased 0.7% to 283,000 units. Housing completions were the highest since 2007, which together with slowing demand could help to lower prices.

Goldman Sachs trimmed its second-quarter gross domestic product estimate by two-tenths of a percentage point to a 2.8% annualized rate. The economy contracted at a 1.5% pace in the January-March quarter.

“The Fed’s aggressive and abrupt policy tightening may soon be criticized for letting in the winds of recession,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

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Reporting by Lucia Mutikani
Editing by Nick Zieminski and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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