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China’s key interest rate fell near a two-year low, but the decline was seen fleetingly quickly by Reuters

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© Reuters. FILE PHOTO: Paramilitary police officers stand guard in front of the headquarters of the People’s Bank of China, the Central Bank (PBOC), in Beijing, China September 30, 2022. REUTERS/Tingshu Wang

SHANGHAI (Reuters) – Liquidity conditions in China’s interbank money markets softened further on Tuesday as money supply outpaced demand despite the central bank’s massive withdrawal of funds.

Key rates fell, with the volume-weighted average rate of overnight repo traded on the interbank market falling below the 1% threshold for the first time in two months to 0.8532%, the lowest level since Jan. 6 last year.

By midday, the overnight repo was trading at 0.8716%, down about 21 basis points from the previous close, and the seven-day repo settled at 1.6361%, more than 36 basis points lower than the reverse repo rate charged by the People’s Bank of China. (People’s Bank of China).

Traders said the drop in interbank rates was largely due to loose liquidity conditions after financial institutions lowered leverage this month.

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“After last week’s crazy bond redemptions, everyone has a lot of cash,” said one fund trader.

While most other major economies raise interest rates to tame inflation, Beijing places more emphasis on propping up a slowing economy by keeping interest rates low.

Dealers said many market participants took advantage of the low repo rates to fund leveraged deals in bonds.

The government bond market experienced its worst one-day sell-off in two years last week, as risk appetite swelled amid mounting expectations of a gradual easing of strict COVID-19 restrictions and official moves to prop up the troubled real estate sector.

Sentiment has stabilized this week, as the People’s Bank of China (PBOC) depleted 170 billion yuan on a net basis via a seven-day reverse repo earlier in the session. [CN/MMT]

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The moves came after the central bank drained short-term liquidity from the banking system for the first time in eight days on Monday.

However, markets are divided on whether the decline in money rates will be sustainable.

“We are more inclined to view the recent decline in CNY prices as short-lived,” said Francis Cheung, interest rate analyst at OCBC Bank.

“We do not expect interest rates to return to their lowest levels in September and October, given the more supportive economic policy for China, however the stance of monetary policy is more balanced.”

State media quoted Deputy Central Bank Governor Pan Gongsheng as saying that the People’s Bank of China will provide 200 billion yuan in loans to commercial banks for housing completion.

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“While markets are certainly keen on the forward rate, new COVID cases are high and picking up, which should put the focus back on the heightened risks of lockdowns,” Duncan Tan, DBS price strategist, said in a note.

The capital, Beijing, closed parks, shopping malls and museums on Tuesday while more cities resumed mass testing for the coronavirus, in a fight over a new surge in infections nationwide that has deepened concerns about its economy.

Tan added that there may be no more pro-growth policy measures in the near term, after efforts to stimulate prices higher, saying, “Prices could continue to decline.”

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The $69 billion real estate giant Blackstone is hitting the payback limit

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(Bloomberg) — Blackstone’s $69 billion real estate fund for wealthy individuals said it will limit redemption requests, one of the most dramatic signs of a downturn in the company’s big profit engine and a chilling indicator for the real estate industry.

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Blackstone Real Estate Income Trust faces withdrawal requests that exceed its quarterly limit, a major test of one of the private equity firm’s most ambitious efforts to reach individual investors. The news, per Thursday’s letter, sent Blackstone stock down 10%, the biggest drop since March.

“Our business is built on performance, not on cash flows, and performance is very solid,” said a Blackstone spokesperson, adding that BREIT’s focus in rental housing and logistics in the Sun Belt puts it well positioned going forward. This year, the fund has piled into more than $20 billion in swap contracts through November to counter rising interest rates.

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The fund has become a real estate giant since its inception in 2017, snapping up apartments, suburban homes and dormitories and growing rapidly in an era of ultra-low interest rates as investors chased returns. Now, rising borrowing costs and a cold economy are rapidly changing the fund’s profile, causing BREIT to warn that it may limit or suspend repo orders in the future.

Blackstone’s creation of BREIT has shed light on the non-traded real estate investment trust (REIT) space. Unlike many REITs, BREIT shares are not traded on exchanges. It has thresholds on how much money investors can have to avoid a forced sale. This means that if too many people head to the exits, the fund board can choose to restrict withdrawals or raise their limits. BREIT said orders exceeded the 2% of monthly net asset value and 5% of the quarterly limit.

BREIT said in a letter on Thursday: “Should BREIT receive high repurchase orders in the first quarter of 2023, BREIT intends to fulfill repurchases at 2% of the monthly net asset value limit, subject to the 5% quarterly net asset value limit.” “.

Senior Blackstone executives have bet on the fund. Bloomberg reported last month that President John Gray had put an additional $100 million of his own money into BREIT since July, said CEO Steve Schwarzman, a person familiar with the matter at the time.

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In the past year, wealthy individuals, family offices and financial advisors have become more cautious about locking up money in assets that are difficult to trade and value. At UBS Group AG, some advisors have worked to reduce exposure to BREIT. A large portion of the fund’s refunds have come from Asia this year, said a person familiar with the matter, who asked not to be identified citing private information.

“The Gates Are Going Up,” Michael Brown, an analyst at Keefe Bruyette & Woods, said in a note Thursday.

“Retail channel growth has been a major driver of BX’s success in recent years, and growth challenges facing the company on the retail side may continue to impact BX’s valuation,” Brown said.

cold properties

Blackstone’s move is the latest sign of a slowdown in the real estate industry. High borrowing costs caused many landlords to struggle with refinancing and even prompted banks to explore potential sales of American office loans. On the residential side, the housing market has slowed broadly.

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Rising debt costs have forced Blackstone to readjust valuations on some of BREIT’s holdings and squeezed the fund’s returns. For the year through October, a key class of shares in the fund generated a net return of 9.3%. That compares to returns of 13.3% for one year.

However, BREIT’s returns are outperforming the S&P 500. The fund is heavily concentrated in urban warehouses and rental housing, areas that Blackstone dealmakers believe would provide strong cash flows in a downturn. Separately, the company announced Thursday that it is offloading stakes in two Las Vegas hotels in a deal that saves money for BREIT.

The Las Vegas deal values ​​real estate at $5.5 billion and is expected to generate profits of approximately $730 million for BREIT shareholders, according to a person familiar with the matter who requested anonymity citing private information.

– With the assistance of John Gittleson.

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Disasters caused insured losses of $122 billion in 2022

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© Reuters. The remains of destroyed homes are seen nearly a month after Hurricane Ian made landfall in Fort Myers Beach, Florida, US, October 26, 2022. REUTERS/Marco Bello

ZURICH (Reuters) – Hurricane Ian and other natural disasters have caused insured losses of $115 billion so far this year, well above the 10-year average of $81 billion, Swiss Re (OTC:) estimated Thursday.

She explained that natural and man-made disasters caused economic damage amounting to $268 billion, of which $122 billion was covered by insurance, making 2022 one of the most expensive sectors so far.

Hurricane Ian, a Category 4 hurricane that struck Florida in September, was the single largest loss-causing event of the year so far, with estimated insured losses of about $50-65 billion. This would put it second only to Hurricane Katrina in 2005.

Swiss Re said 2022 marked the second year in a row that estimated insured losses exceeded $100 billion, in line with an average annual increase of 5-7% over the past decade.

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It added that secondary risks such as floods and hailstorms caused insured losses of more than $50 billion.

Widespread flooding in Australia after heavy rains in February and March caused an estimated $4 billion in damage in the country’s costliest natural disaster.

France suffered the deadliest series of hailstorms ever observed, with insured losses reaching an estimated 5 billion euros ($5.2 billion).

Swiss Re has estimated that more than 11,000 people have died in natural and man-made disasters so far this year, excluding the death toll from extreme heatwaves in Europe.

Munich Re is due to release its annual report on the disaster in January.

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($1 = 0.9626 euros)

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Biotech tells Citadel Securities that other major traders manipulated its share price

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In a new lawsuit, Northwest Biotherapeutics has accused the market maker of illegal “spoofing” orders.

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