Deaths Globally Top 100,000; U.S. Fatalities Rise: Virus Update

Deaths Globally Top 100,000; U.S. Fatalities Rise: Virus Update(Bloomberg) -- New York’s daily virus deaths fell slightly after three record-high days, though hospitalizations continued to slow. France reported four deaths in Covid-19 patients using experimental drugs, including one touted by U.S. President Donald Trump.Italy may extend its lockdown into May. U.K. Prime Minister Boris Johnson is walking around as part of his recovery as the nation had the most deaths in one day.The U.S. Surgeon General said most of the nation won’t be ready to end social distancing measures by May 1, casting doubt on a quick restart of the economy.Key DevelopmentsBREAKING: Virus deaths rise to 100,376, according to data compiled by Johns Hopkins UniversityCoronavirus Tracker: Global Cases 1.63 Million; Deaths 98,400‘No Sail Order’ for cruise ships extended; Boeing may cut jobsPotential coronavirus drugs may cost as little as $1, study saysHong Kong’s edge over Singapore shows early measures workAmerica worships from the parking lot, onlineWhite House weighs new panel to map post-virus recoveryU.K. Reports Most Deaths in 24 Hours (12:40 p.m. NY)The U.K. reported its highest one-day death toll with 980 on Thursday, bringing total number of British fatalities to 8,958, Health Secretary Matt Hancock said in a televised briefing. There are 19,304 people being treated in a hospital.France Reports Heart Incidents From Drug (12:30 p.m NY)French authorities reported 43 cases of heart incidents tied to using hydroxychloroquine amid mounting interest in the malaria drug to treat coronavirus cases. The U.S. has stockpiled as many as 29 million doses and President Donald Trump touts the drug as a possible “game changer.”The French drug safety agency ANSM said four of the patients died in incidents since March 27 while in total, 82 serious adverse reactions were found from experimental treatments, split between hydroxychloroquine and lopinavir-ritonavir.President Emmanuel Macron flew to Marseille Thursday to visit the clinic where uncontrolled studies by a doctor named Didier Raoult have propelled the 65-year-old malaria drug to international fame. Macron’s advisers said his trip was not an endorsement.Italy Reports Fewer Deaths, Cases (12:05 p.m. NY)Italy had fewer new cases and deaths and the government prepared to extend the country’s lockdown granting only slight concessions to businesses demanding a restart of the economy. There were 3,951 new cases, down from 4,204 a day earlier, civil protection officials said. Italy registered 570 deaths in the past 24 hours, less than 610 a day earlier. That brings the total number of fatalities to 18,849.Cuomo Is Cautiously Optimistic (11:40 a.m. NY)New York State reported 777 deaths from the coronavirus in the past 24 hours, Governor Andrew Cuomo said at his daily press conference. The state reported 799 deaths the previous day.The governor said the deaths reflects those individuals who were admitted to a hospital when the state’s rate peaked about two weeks ago.“The leveling off of the number of lives lost is a somewhat hopeful sign,” Cuomo said. Friday was the first day in three that New York’s daily death toll didn’t set a record.U.K. Premier in Recovery (11:35 a.m. NY)U.K. Prime Minister Boris Johnson, who has been treated for coronavirus in a London hospital, has “been able to do short walks, between periods of rest, as part of the care he is receiving to aid his recovery,” according to a spokesman for 10 Downing Street.Johnson was released from intensive care Thursday evening after his deputy said it’s too soon for the U.K. to relax the lockdown imposed 17 days ago in an effort to slow the spread of the coronavirus.Greece Extends School Lockdown (11:35 a.m. NY)Greece is extending by one month, to May 10, the closure of all schools, universities and other educational institutions as a precautionary measure, Deputy Citizen Protection Minister Nikos Chardalias said. The country is already in total lockdown and has so far recorded abou 2,000 coronavirus cases and 90 deaths.Senators Seek Release of Detainees (11:30 am. NY)A bipartisan group of U.S. senators asked Secretary of State Michael Pompeo to press foreign governments for the release American detainees, citing the health risk from the coronavirus pandemic.“Detention facilities are a fertile breeding ground for Covid-19, with rampant overcrowding, lack of basic hygiene, ill-equipped medical facilities, and poor health conditions,” according to the letter Friday signed by Connecticut Democrat Chris Murphy and Florida Republican Marco Rubio joined by Texas Republican John Cornyn and Vermont Democrat Patrick Leahy. “In many authoritarian countries, these conditions are further exacerbated by inhumane conditions including malnutrition, medical neglect, and torture.”U.S. Surgeon Casts Doubt on Early Restart (10:15 a.m. NY)U.S. Surgeon General Jerome Adams said few parts of the country will be able to relax social distancing efforts by May 1, taking a more cautious posture as President Trump and his top aides push to get the economy restarted.Some communities with strong surveillance systems “will be able to think about opening on May 1st,” Adams said on Fox News. “Most of the country will not, to be honest with you.”Vice President Mike Pence on Thursday outlined mileposts to meet before mitigation steps are relaxed, including widespread testing and therapeutic medicines, both of which may be months away.Read story here3M Alleges N95 Price Gouging (9:50 a.m. NY)3M Co. sued Performance Supply LLC of New Jersey in federal court, alleging illegal price gouging and deceptive practices in sales of N95 masks. 3M said Performance Supply offered to sell $45 million in N95 respirators to New York City at prices 500%-600% over the list price, according to a statement. 3M said it’s seeking damages.Docket link.Singapore Reports 198 New Cases, None Imported (9:36 a.m. NY)The Ministry of Health confirmed an additional 198 cases of Covid-19, with none of them imported.Earlier, the government placed a fifth foreign worker dormitory under isolation to curb the spread of the coronavirus in the city-state. Health Minister Gan Kim Yong declared a foreign worker housing facility in east Singapore as an isolation area. Singapore started placing some of these dorms under 14-day quarantines from Sunday.The country reported its highest daily increase of infections on Thursday with more than 200 of the 287 new cases linked to foreign worker dormitories.NHS Reports 866 More Deaths in England (9:32 a.m. NY)A further 866 people who tested positive for the coronavirus have died in England, bringing the total of confirmed fatalities in hospitals to 8,114. The patients were aged between 27 and 100 years old, NHS England said. The highest number was in London at 249, followed by 229 in the Midlands.Earlier, Neil Ferguson, an epidemiologist at Imperial College London who advises the U.K. government, told BBC Radio 4 that it will be “several more weeks” before scientists can draw conclusions about the rate of decline in cases and therefore recommend any lifting of lockdown measures. But he also said there’s preliminary evidence the lockdown is working better than expected.Putin Plans $14 Billion Stimulus (9:15 a.m. NY)Russian President Vladimir Putin’s government plans to dramatically ramp up stimulus measures to prop up an economy that is lurching toward recession. The government will roll out about 1 trillion rubles ($13.5 billion) of new spending, according to two people familiar with the plans. Some of the money will go toward subsidizing salaries of workers idled by isolation measures to fight the coronavirus, the people said.Antibody Tests Could Be Available in a Week or So: Fauci (8:42 a.m. NY)The U.S. will “have a rather large number of tests that are available” within a week or so, Fauci said. Tests for coronavirus antibodies are being validated by the National Institutes of Health and the FDA to make sure they are consistent and accurate, he said on CNN.Portugal Reports Highest Daily Case Increase (8:31 a.m. NY)Portugal reported the highest daily increase in confirmed cases on Friday, while the number of patients in intensive-care units fell for a third day. There were 1,516 new cases, taking the total to 15,472, the government’s Directorate-General of Health said on Friday. Total deaths increased to 435 from 409.Tokyo Games CEO Hints at Further Delay: AP (8:21 a.m. NY)The chief executive officer of the committee organizing the Tokyo Games said on Friday that he can’t guarantee the postponed Olympics will be staged next year, the Associated Press reported. Japanese Prime Minister Shinzo Abe issued an emergency declaration this week to battle the virus, putting the country under restrictions after it seemingly had avoided the spread.“I don’t think anyone would be able to say if it is going to be possible to get it under control by next July or not,” committee CEO Toshiro Muto said, speaking through an interpreter at a news conference conducted remotely.Trump Wants Next Aid Round Exclusively for Small Businesses (7:32 a.m. NY)The aid package in Congress should be limited to a funding boost for small businesses to help them keep their employees, “with no additions,” U.S. President Donald Trump said in a tweet. “We should have a big Infrastructure Phase Four with Payroll Tax Cuts & more,” he said.Trump earlier said he has asked his agriculture secretary to “use all of the funds and authorities at his disposal,” to aid U.S. farmers, whose financial peril has worsened in the coronavirus pandemic.Democrats are holding firm to their demand that a $250 billion economic stimulus for small businesses must include more funds for hospitals, states and localities struggling with the pandemic, leaving congressional leaders at a standoff for now.UN Envoy Warns Libya Escalation is Straining Response (7:13 a.m. NY)An escalation in Libya’s year-long war is straining the North African country’s ability to deal with the coronavirus pandemic, the acting United Nations envoy said. “It’s incredibly reckless. It’s inhumane, it’s stretching the capacity of local authorities and the health infrastructure that is already decimated,” Stephanie Williams told Bloomberg in an interview on Thursday.German Hospitals May Face Drug Shortages (7 a.m. NY)German hospitals are concerned that they will soon face a shortage of drugs needed to treat Covid-19 patients who must be ventilated, Der Spiegel reported, citing an Augsburg hospital pharmacist.Earlier this week, the European Union’s most senior health official appealed to the pharmaceutical industry to boost production of critical medicines needed to treat the symptoms of the coronavirus, warning that several member states may soon run out.France Confirms 50 Cases on Aircraft Carrier (6:39 a.m. NY)The French Defense Ministry said 50 of the aircraft carrier Charles-de-Gaulle’s crew members have been infected. Three have been evacuated to a hospital in Toulon, south of France, while a medical team was transported on board to conduct a probe. The ship has shortened its mission and is heading toward its base in Toulon in the Mediterranean sea while sanitary processes aboard have been reinforced with all crew members now having to wear a mask.Potential Coronavirus Drugs May Cost as Little as $1 (6:38 a.m. NY)Potential coronavirus treatments could be made for as little as $1, well below their typical price tags in pharmacies, according to an analysis of nine drugs in clinical trials. If their promise is confirmed in ongoing studies, medicines for Covid-19, including hydroxychloroquine, which President Donald Trump touted as a treatment, and Gilead Sciences Inc.’s remdesivir could be manufactured from $1 to $29 a course, a study published Friday in the Journal of Virus Eradication found.Moscow Hospitals Stretched to Limit (6 a.m. NY)Moscow clinics and ambulances are being stretched to the limit as the number of hospitalizations from coronavirus doubled over the last several days, Interfax reported, citing Deputy Mayor Anastasia Rakova.“I’ll tell you one thing for sure: we haven’t reached the peak yet,” Moscow Mayor Sergei Sobyanin said in a interview with state-run RIA Novosti. “We are still in the foothills of the mountain, and not even half way up.” About two-thirds of Russia’s 11,917 coronavirus infections are in Moscow, which saw cases jump 17% overnight.Belgian Deaths Top 3,000 (5:50 p.m. HK)The pandemic has so far claimed 3,019 lives in Belgium, with a record 325 deaths reported in the past 24 hours and an additional 171 in Flemish nursing homes between March 18 and March 31 that were previously unreported.The numbers include deaths which are highly likely linked to a coronavirus infection without being confirmed by a diagnostic test. The number of patients currently being treated in hospitals rose by 20 to 5,610 and 1,278 patients are in intensive care, a decline of seven from the prior day. Confirmed cases rose by 6.7% to 26,667.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Singapore stops teachers using Zoom app after 'very serious incidents'

Singapore stops teachers using Zoom app after 'very serious incidents'Singapore has suspended the use of video-conferencing tool Zoom by teachers, its education ministry said on Friday, after "very serious incidents" occurred in the first week of a coronavirus lockdown that has seen schools move to home-based learning. One of the incidents involved obscene images appearing on screens and strange men making lewd comments during the streaming of a geography lesson with teenage girls, according to local media reports. Zoom Video Communications Inc ZM.O has been plagued with safety and privacy concerns about its conferencing app which has seen a surge in usage as offices and schools around the world shut to try curb coronavirus infections.


Boeing considers potential 10% cut to workforce: WSJ

Boeing considers potential 10% cut to workforce: WSJThe potential job cuts are expected to largely target Boeing's commercial arm, which has been under strain due to the crisis in the global airline industry, the report https://www.wsj.com/articles/boeing-considers-potential-10-cut-to-workforce-11586485509?mod=e2tw said. Amid the coronavirus pandemic, Boeing has been suspending production at various plants, including the manufacturing of its 787 airplane at its facilities in South Carolina. Last week, the U.S. planemaker's Chief Executive Officer Dave Calhoun outlined a plan of voluntary layoffs for employees, while warning that the pandemic would have a lasting impact on the aerospace industry.


Saudi king, Trump, Putin review importance of cooperation between oil producing countries

Saudi king, Trump, Putin review importance of cooperation between oil producing countriesSaudi Arabia's King Salman, U.S. President Donald Trump and Russian President Vladimir Putin reviewed, in a phone call, the importance of cooperation between oil producing countries, after Thursday's OPEC+ meeting, Saudi state news agency SPA reported. The leaders stressed the importance of cooperation between oil producing nations to maintain stability of energy markets and support growth in global economy, SPA reported on Friday.


It’s “bullshit” that VCs are open for business right now (but that could change in a month)

This afternoon, the law firm Fenwick & West hosted a virtual roundtable discussion with New York-based venture capitalists: Hadley Harris, a founding general partner with Eniac Ventures; Brad Svrluga, a cofounder and general partner of Primary Ventures; and Ellie Wheeler, a partner with Greylock.

Each investor is experiencing the coronavirus-driven lockdown in unique and even positive ways. Their professional experiences were very much in sync, however, and founders should know the bottom line is that they aren’t making brand-new bets at this very moment.

On the personal front, Wheeler is expecting her first child. Harris is enjoying lunch with his wife every day. Svrluga said that he hasn’t had so many consecutive meals with his kids in more than a decade, which he described as a treat.

Professionally, things have been more of a struggle. First, all have been swamped in recent weeks, trying to assess which of their startups are the most at risk and which are worth salvaging and how to do this.

They are so busy, in fact, that none is writing checks right now to founders who might be trying to reach then for the first time. Indeed, Harris takes issue with investors who’ve said throughout this crisis that they are still very open to pitches. “I’ve seen a lot of VCs talking about being open for business, and I’ve been pretty outspoken on Twitter that I think that’s largely bullshit and sends the wrong message to entrepreneurs.

“We’re completely swamped right now in terms of bandwidth” because of the work required by existing portfolio companies. Bandwidth, he added, “is our biggest constraint, not money.”

What happens when bandwidth is no longer such an issue? It’s worth noting that none thinks that meeting founders exclusively remotely is natural or normal or conducive to deal-making — not at their firms, in any case.

Wheeler noted that while “some accelerators and seed funds that are prolific have been doing this in some way, shape or form for a bit,” for “a lot of firms,” it’s just awkward to contemplate funding someone they have never met in person.

“The first part of the diligence process is the same, that’s not hard,” said Wheeler. “It’s meeting the team, visiting [the startup’s workspace], meeting our team. How do you do that [online]?” she asked. “How do you mimic what you pick up from spending time together [both] casually and formally? I don’t think people have figured that out,” she said, adding, “The longer this goes on, we’ll have to.”

As for what to pitch them anyway, each is far less interested in sectors that aren’t highly relevant to this new world. Harris said, for example, that now is not the time to float your new idea for a brick-and-mortar business. Wheeler separately observed that many people have discovered in recent weeks that “distributed teams and remote work are actually more viable and sustainable than people thought they were,” suggesting that related software is of continued interest to Greylock.

Svrluga said Primary Ventures is paying attention to software that enables more seamless remote work, too.  Telecommuting “has been a culture positive event for the 18 people at my firm,” he said.

Naturally, the three were asked — by Fenwick attorney Evan Bienstock, who moderated the discussion — about downsizing, which each had noted was a nearly inescapable part of lengthening a startup’s runway right now. (“It sucks,” said Svrluga. “People are losing their jobs. But to continue to run teams with the same organizational structure as 60 days ago, [which was] the most favorable environment for building industries, you can’t do it.”)

Their uniform advice for management teams that have to cut was to cut deeply to prevent from having to do it a second time.

Naturally, no one wants part ways with the people who they’ve brought aboard.  But “no CEO has ever told me, ‘Dammit, we cut too far,'” said Svrluga, who has been through two downturns in his career.  In contrast, “at least 30%” of the CEOs he has known admitted to not going far enough to insulate their business while also keeping its culture intact.

And culture can be especially fragile given the current circumstances, suggested Wheeler.  “It’s so hard to do [layoffs] well.” Being forced to do them remotely makes it that much worse. After all, “Maintaining culture after a remote [layoff], no one leaned how to do that [before this pandemic struck];  it’s really hard.” But the “second cut hurts way more,” she continued. “It’s the second [layoff] that really throws people.”

As for what’s next, the VCs all said that they’ll be receptive to new ideas after spending the last few weeks working through layoffs and burn rates and projected runways and the new stimulus package that they’re trying to find a way to make work for their startups.

As for how soon that might be, Wheeler and Svrluga suggested their worlds might look less upside down in a month. They proposed that a month should also give founders more needed time to adjust some of their expectations.

Meanwhile, Harris seemed to agree. “It will probably be a gradual thing . . .  “I’m not sure what next week holds but feel free to ping me in a month and I’ll let [founders] know if I think it’s opening up.”

After an extended quarantine, the next ISS crew arrives in orbit

Working from home is easy for some and difficult for others, but one place it’s downright impossible is the International Space Station. So pandemic or no pandemic, the latest crew had to get themselves up there. They’ve just had a successful launch and arrival, but only after a protracted quarantine period.

To be clear, ISS crews are always quarantined prior to launch to make sure they don’t bring the flu up from a chance encounter, but given the coronavirus situation, this was a special occasion. Quarantine started in April and not even the crew’s families were allowed to be confined with them. Only essential personnel were allowed at launch.

I’ve asked NASA for more details and any extra measures they’ve taken regarding the coronavirus for this or future missions.

Expedition 63 will relieve the current crew after about a week of overlap, during which no doubt the ISS begins to feel fairly crowded.

This crew is special in that among its duties will be to welcome the astronauts aboard the first Commercial Crew mission to the ISS, who will arrive on a SpaceX Crew Dragon capsule launched aboard a Falcon 9 rocket. That mission too is currently on schedule for May despite the pandemic.

Every crew mission for years has been done using Russia’s venerable Soyuz spacecraft. These have been updated continually for decades, but still feature more than a little of what might best be described as “repeatedly flight proven” technology.

The effort to engineer a state of the art spacecraft for crewed missions has lasted several years, coming down to SpaceX and rival Boeing in the home stretch. But while both have suffered repeated delays, Boeing has had numerous other failures that have pushed its launch out towards the end of the year and perhaps beyond. SpaceX, on the other hand, is ready to go.

The first commercial crew mission, whether it’s next month or a little later, will be the culmination of years of competition, and the first time a crew has gone to orbit in an American-made spacecraft since the Shuttle was retired. (Virgin Galactic has piloted its spacecraft to the edge of space but its human-rated craft is not an orbital vehicle.)

If all goes well, NASA’s Chris Cassidy and Roscosmos’s Anatoly Ivanishin and Ivan Vagner will welcome the historic mission to the ISS soon.

Calpers Forfeited a $1 Billion Payday by Scrapping Market Hedge

Calpers Forfeited a $1 Billion Payday by Scrapping Market Hedge(Bloomberg) -- Three years ago, America’s largest pension fund made an unusual investment. It bought so-called tail-risk protection, a kind of insurance against financial catastrophe. In a market meltdown like the one sparked by the coronavirus, the strategy promised a massive payout -- more than $1 billion.If only the California Public Employees Retirement System had stuck with the plan. Instead, Calpers, as the fund is known, removed one of its two hedges against a bear market just weeks before the viral outbreak sent stocks reeling, according to people familiar with its decision.The timing couldn’t have been worse. The fund had incurred hundreds of millions of dollars in premium-like costs for those investments. Then it missed out on a bonanza when disaster finally struck.Softening the blow, Calpers held on to the second hedge long enough to make several hundred million dollars, one of the people said.Ben Meng, chief investment officer of Calpers, said the fund terminated the hedges because they were costly and other risk-management tools are more effective, cheaper and better suited to an asset manager of its size.“At times like this, we need to strongly resist ‘resulting bias’ -- looking at recent results and then using those results to judge the merits of a decision,” Meng said in a statement. “We are a long-term investor. For the size and complexity of our portfolio, we need to think differently.”Calpers had been warned about the perils of shifting strategy. At an August 2019 meeting of its investment committee, Andrew Junkin, then one of the pension plan’s consultants at Wilshire Associates, reviewed the $200 million of tail-risk investments.“Remember what those are there for,” Junkin told Calpers executives and board members, according to a transcript. “In normal markets, or in markets that are slightly up or slightly down, or even massively up, those strategies aren’t going to do well. But there could be a day when the market is down significantly, and we come in and we report that the risk-mitigation strategies are up 1,000%.”Costly Flip-FlopSure enough, the position Calpers gave up generated a 3,600% return in March. The costly flip-flop demonstrates the pitfalls of trying to time stock-market hedging. Like many insurance products, tail-risk protection seems expensive when you need it least.That’s especially true at a pension fund. Calpers tries to generate an annual return of 7% on its investments, leaving little room for error at a time when risk-free rates are close to zero. This kind of bear-market hedge can cost $5 million a year for every $1 billion protected, according to Dean Curnutt, chief executive officer of Macro Risk Advisors, which devises risk-management strategies for institutional investors.“It becomes hard to establish and hold these hedges because they eat away at precious returns,” Curnutt said. “Pension funds have return targets that are highly unrealistic.”Seeking ProtectionCalpers, based in Sacramento, manages about $350 billion to fund the retirement benefits for some 2 million state employees, from firefighters to librarians to garbage collectors. When the pension plan doesn’t meet its 7% target, taxpayers may have to kick in more money to make sure there’s enough to meet its long-term obligations.Half of Calpers’s assets are in stocks, and historically it has tried to blunt the impact of market downturns by investing in bonds, real estate, private equity and hedge funds. Over the past 20 years, the portfolio has returned 5.8% annually, compared with 5.9% for the S&P 500 and about 4.6% for an index of Treasuries.In 2016, Ted Eliopoulos, then Calpers’s chief investment officer, asked his staff to investigate ways of protecting its stock holdings from crashes such as those in 1987, 2001 and 2008, according to the people familiar with the fund. He’d been inspired by Nassim Taleb, the former options trader who wrote about the probabilities of rare but devastating events in his 2007 bestseller “The Black Swan.”The year after the book was published, Lehman Brothers went bankrupt, stocks imploded and the global economy seized up. Calpers reported a 23% loss in 12 months, and Taleb became a celebrity.Rare EventsTail-risk hedging evolved from probability theory. In statistics, the fat belly of a bell curve represents events that are likeliest to occur while the skinny tail ends indicate those that are possible but infrequent, such as a collapse in financial markets.In 2017, Calpers hired two outside fund managers to provide tail-risk protection. Universa Investments, a Miami-based firm advised by Taleb, provided the potentially more profitable hedge; LongTail Alpha in Newport Beach, California, the second one.The investments, initially small and exploratory, quadrupled in size over the following two years. They ultimately safeguarded the pension plan against losses on several billion dollars, the people familiar with the situation said.The program wasn’t cheap. Calpers calculated that in the year ended June 30, 2019, the Universa and LongTail Alpha investments reduced its 12-month return by a total of 4 basis points, or roughly $140 million.Some of the hedging expense was management fees. Public filings show Calpers paid Universa $22.5 million and LongTail Alpha $3.2 million that year. The remaining cost reflected the declining value, or bleed, of the underlying positions at a time of low market volatility.‘Price Matters’At its peak, the Universa hedge was enough to protect some $5 billion of Calpers’s $200 billion in public equities, and Eliopoulos had plans to double the program’s size, the people said. It’s unclear how extensive the LongTail Alpha position was.Most institutional investors prefer a more traditional approach to risk management, such as diversifying assets and holding Treasuries. Insurance is harder to grasp and fund managers typically balk at the idea of investing in anything that loses money most of the time, according to Macro Risk Avisors’ Curnutt.“Tail-risk hedging does work,” Curnutt said. “But the price matters quite a bit.”The payoffs can be staggering. In an April 7 letter to clients, Universa said its fund returned 3,612% in March. Calpers could have used that windfall of more than $1 billion to buy more stocks at lower prices or stayed in cash.Eliopoulos left Calpers in late 2018 and joined Morgan Stanley as a vice chairman. He declined to comment.Meng, a former Wall Street trader, was skeptical of tail-risk hedging and ordered a review of the program as part of a wider effort to reduce the number of outside asset managers that Calpers paid, the people familiar with the situation said. A number of his subordinates argued in favor of keeping the hedges in place, saying it was only a matter of time before the 10-year bull market in stocks came to an end, the people said.They lost the battle, and Calpers moved to redeem its tail-risk investments. It gave notice to Universa in October and by January no longer had the position in place that would have paid out more than $1 billion, according to those with knowledge of the decision.LongTail Alpha persuaded Meng to hold on for longer, and fortunately he did. Because that hedge wasn’t terminated until March 31 -- after the stock-market rout -- Calpers was able to reap several hundred million dollars.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Surging Ford Bonds Lead Credit Market Rally After Fed Rescue

Surging Ford Bonds Lead Credit Market Rally After Fed Rescue(Bloomberg) -- Credit risk eased dramatically now that the Federal Reserve’s unprecedented effort to save corporate debt just got even bigger, adding a backstop to what could be hundreds of billions of dollars worth of bonds that are expected to fall to junk.The central bank will expand its bond-buying program to include debt that was investment-grade rated as of March 22 but was later downgraded to no lower than BB-, or three levels into high yield, according to a statement Thursday. It’ll also buy exchange-traded funds that track speculative-grade debt, which surged the most in a decade following the announcement. All together, the programs will support as much as $850 billion in credit.These latest steps provide a huge lifeline to companies like Ford Motor Co. that will now have the support from one of the biggest sources of demand in the world. Its bonds posted the biggest gains in the high-yield index, with its 7.45% debt due 2031 up 18 cents on the dollar, according to Trace. The cost to protect the automaker’s debt against default for five years dropped nearly 200 basis points to around 771 basis points, according to ICE Data Services.Ford is so far the largest fallen angel of this cycle with more than $37 billion entering the Bloomberg Barclays high-yield index this month. Strategists say that’s just the tip of the iceberg, with most expecting the total to exceed $200 billion this year, and credit raters are downgrading companies at the fastest pace since the great financial crisis. But the Fed’s program won’t catch all fallen angels, like Occidental Petroleum Corp., which received its second high-yield rating March 20.Read more: Federal Reserve’s Fallen Angel Bond Buying Won’t Catch Them AllDerivative indexes that track credit default risk eased notably, especially in high yield, which wasn’t originally part of the Fed’s program that was unveiled on March 23. The junk CDX is up nearly 4 points, while investment-grade is about 23 basis points tighter.The new purchases will likely add to what’s already been a substantial rally in credit since the Fed first stepped into the market. Investment-grade spreads have compressed 120 basis points since then, and high-yield spreads are about 230 basis points tighter through Wednesday.“I’m sure there will be all sorts of reasons to ‘fade’ this rally in credit and equities, but I completely disagree,” said Peter Tchir, head of macro strategy at Academy Securities. “I’m already in risk on mode, but wouldn’t be afraid to add more.”Many investors thought the Fed’s initial program was right to just focus on investment-grade debt, as those companies tend to be the biggest employers and more systemically important to financial markets. But the expansion opens up a whole new set of securities that are on the cusp of junk, where the Fed will step in as a buyer in a sea of forced selling.U.S.Credit risk gauges eased following the Fed’s additional injection to buy some junk bonds. There were no new deals ahead of the holiday weekend, and markets closed at 2 p.m. in New York.High-yield funds received another inflow, this time much smaller at $214 million for the week ended April 8, compared to a record $7 billion the prior week, according to Refinitiv Lipper. Investment-grade funds saw another large outflow of $15 billionSome of the hardest-hit parts of the financial world are finally getting a boost after the Federal Reserve expanded its unprecedented support of credit markets to include the debt of riskier borrowersReal estate investment trusts that buy private mortgage bonds, business development companies that lend to small or highly leveraged companies and funds that hold some of the riskiest types of complex debt all surged on ThursdayCaterpillar is in discussions with banks to raise a new $3 billion 9-month revolving credit facilityWells Fargo has been forced to step back from lending to some of America’s biggest companies because of a regulatory cap that restricts its ability to keep growingPrivate equity behemoth Apollo is marketing a roughly $500 million CLO and is looking to price it todayEuropeWhen LVMH issued new euro bonds on April 1, the spread it paid had quadrupled from when it was last in the market in early February, according to data compiled by Bloomberg. Earlier today, Berkshire Hathaway sold 10-year yen bonds at a yield premium of 105 basis points, more than double the 50 basis points it paid to sell similar-maturity notes a little over half a year ago.LVMH’s sale of 1.5 billion euros of five-year notes last week pulled in orders of nearly six billion eurosAt the same time, investors can’t get enough of the corporate deals on offer, with Schneider Electric SE pulling in orders for 15 times the size of its 500 million euro note offering on April 2Primary market sales slowed to a trickle on Thursday, with just two deals from Bank of Nova Scotia and Nordic Investment Bank in the market. The deals will push weekly sales volumes to at least 36.5 billion eurosBritish Airways’ credit rating was cut one notch to junk by Fitch Ratings, potentially complicating the IAG SA-owned carrier’s access to new loans amid a sharp slump in global aviationA measure of high-grade corporate default protection costs fell for a fourth day; the Markit iTraxx Europe index has dropped about 14 basis points this week after spiking during MarchSpreads on euro IG company bonds have dropped to 224 basis points: that’s still nearly double levels at the start of MarchAsiaIn Asia, corporations have been slower to return to the market but a $10 billion sale from Qatar this week amassed about $45 billion of investor orders. It too paid a premium over its existing notes to get the deal done.Sentiment is improving, with traders indicating a tightening in bond spreads and falling default-swap costs. The underperformance of Indonesia’s recently-sold dollar bonds compared with the broad market weighed on investors’ moodMalaysia’s oil giant Petroliam Nasional Berhad is waiting in the wings to bring a jumbo dollar bond, but funding is by no means cheap and spreads on Asia dollar notes are still around the highest in over a decade, according to a Bloomberg Barclays indexNew sales have mainly been focused on investment-grade borrowers, from the Republic of Indonesia to South Korea’s Shinhan Bank. The junk bond market has been slower to re-open, with spreads around the highest in at least a decadeThe Markit iTraxx Asia ex-Japan index of CDS tightened about 6 basis points on Thursday, according to a trader. The index is set to tighten this week after jumping 21 basis points last weekFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.