News Headline Summary

News of note from this weekend...

European News:
- Fitch downgraded Cyprus to B from BB-; said the Cypriot government support to the banking sector is likely higher than previously thought. (Newswires) Cypriot debt has been downgraded by two notches and is now 'highly speculative' (junk), was previously 'non-investment grade' (junk).

- The ECB has rejected Ireland’s preferred solution to a dispute over the cost of servicing money borrowed to rescue a failed bank according to EU sources. (Newswires) Ireland wants to avoid having to pay EUR 3.1bln a year until 2023 to service a promissory note it issued to underwrite failed Anglo Irish Bank.

- EU's Van Rompuy said that the Euro area is 'no longer in existential threat mode' and must now focus on reducing time lags before an economic recovery can take hold in bloc's labor market. (Newswires) He said that 2012 has been a turning point and there will be some time before we see the positive effects on unemployment. He also added that the priority of Europe is to reduce these time lags, speed up recovery and speed up employment, 2013 and 2014 will be a better time.

UK news:
- Mark Carney, who will take over from Sir Mervyn King in July, hinted strongly at a new approach when he said that central bankers should be prepared to take aggressive measures to help economies. (Observer) Speaking on the world economy in general he noted that "there remains considerable flexibility – which includes the use of communications, which includes the use of unconventional measures".

George Osborne is cooling on the idea of changing the Bank of England’s inflation target to one aimed at the amount of spending, top Treasury officials have told the FT. (FT) The chancellor now thinks there is sufficient leeway in a “flexible” inflation target for the central bank to boost growth.

- The Treasury has lost out on up to GBP 34bln in tax revenues since the BoE began its money-printing programme, a new study has revealed. (The Sunday Times) The tax shortfall has emerged because the deficits on company pension schemes have ballooned in the wake of the Bank’s QE programme. Companies have been forced to pump billions of pounds into their pension funds to plug the gap, instead of investing the cash in expansion or higher salaries.

Asian News:
- Japan’s government and ruling parties on Sunday approved the fiscal 2013 state budget proposal, with expenditures in the general-account budget of JPY 92.61trl. (Kyodo)

- Japan’s PM adviser Takenaka said the JPY still has room to weaken further, and many see USD/JPY at 95.00 as its desirable rate. (Newswires)

27 Jan 2013 - 22:05 - Fixed Income Bank Speaker - Source: Newswires/Observer/FT/The Sunday Times/Kyodo

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