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Mortgage investment funds become ‘epicentre’ of crisis – Financial Times

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Real estate investment trusts that specialise in buying mortgage-backed securities are playing a prominent role in the current market turmoil, dumping their holdings in response to margin calls by their banks.

The mortgage Reits entered the coronavirus crisis owning an estimated $500bn of bonds backed by property loans and have come under pressure because they use short-term borrowings to squeeze higher returns from their holdings.

“The Reits are at the absolute epicentre of this crisis, given that their business requires leverage,” said Matthew Howlett, Reits analyst at Nomura.

Shares in Annaly Capital and AGNC Investment, the two largest mortgage Reits, have been cut in half in recent weeks. A smaller peer, AG Mortgage, fell 38 per cent on Monday after saying “it does not expect to be in a position to fund the anticipated volume of future margin calls under its financing arrangements in the near term”.

The mortgage Reits fund themselves by pledging bonds in return for cash in the short-term funding, or “repo”, markets, and have assets valued at as much as 10 times their common equity. The high leverage allows them to pay dividends well in excess of the yields on the bonds they buy. Because of their legal structure, the Reits are obliged to pay out substantially all of their earnings to shareholders. 

The falling value of their mortgage bonds, driven down by the rush for cash and worries about defaults as the coronavirus leaves homeowners unemployed, has pushed the Reits past their leverage limits, forcing them to sell bonds into an already weak market. 

“We expect there was a steady pattern of forced selling in recent weeks by Reits to try to manage leverage levels,” wrote UBS analyst Brock Vandervliet in a note to clients on Monday. 

Other types of investors are trying to raise cash by selling mortgage bonds as well. Mortgage traders said multiple companies sought to offload mortgage debt on Sunday, including one mutual fund that sought offers on more than $1bn of bonds.

Mortgage Reits own roughly $500bn in mortgage-backed bonds, or about 5 per cent of the market, according to Nomura. 

The banks the Reits depend on for financing are increasingly hesitant to accept mortgage bonds as collateral — and are pressing the Reits with margin calls, threatening to liquidate the bonds if the Reits do not post more cash. “The dealers want cash, they don’t want collateral,” said Mr Howlett. “They are saying, ‘I have no exit for these loans — I’m going to protect myself’.” 

The mortgage Reits are selling mortgage bonds as the Federal Reserve has been trying to support the market. The central bank said on Monday it would buy “agency” mortgage bonds — which are guaranteed by the government-backed Fannie Mae and Freddie Mac — “in the amounts needed to support smooth market functioning”.

Even as shares of its peers fell, AGNC rose 6 per cent, reflecting the fact that its portfolio is heavily weighted to agency bonds. They accounted for 98 per cent of its portfolio of the end of the fourth quarter. Half of AG’s portfolio, by contrast, was non-agency, and included subprime residential and commercial real estate exposures.

“Based on the Fed’s actions, the thing that should recover first should be agency exposure,” said Mr Vandervliet. 

Annaly, AGNC and AG did not respond to requests for comment.

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What Makes Barrick (GOLD) an Attractive Investment Option – Yahoo Finance

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Barrick Gold Corporation GOLD looks promising at the moment. The company’s shares have gained around 10% so far this year.

We are positive regarding the company’s prospects and believe that the time is right for investors to add the stock to their portfolios as it looks promising and is poised to maintain the momentum.

Let’s see what makes this gold mining giant a compelling investment option at the moment.

An Outperformer

Barrick has significantly outperformed the industry in the past year. The company’s shares have rallied 50.2% compared with 27.5% rise of the industry. The company also outpaced the S&amp;P 500’s decline of 8% for the same period.” data-reactid=”12″>Barrick Gold Corporation GOLD looks promising at the moment. The company’s shares have gained around 10% so far this year.

We are positive regarding the company’s prospects and believe that the time is right for investors to add the stock to their portfolios as it looks promising and is poised to maintain the momentum.

Let’s see what makes this gold mining giant a compelling investment option at the moment.

An Outperformer

Barrick has significantly outperformed the industry in the past year. The company’s shares have rallied 50.2% compared with 27.5% rise of the industry. The company also outpaced the S&P 500’s decline of 8% for the same period.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="

Higher Gold Prices

The coronavirus pandemic has led to a surge in gold prices, driven by the demand for safe-haven investments. Further, declining oil prices and geopolitical tensions are triggering demand for gold.

Moreover, the company’s average realized price of gold rose 21.3% year over year in fourth-quarter 2019 and boosted margins. Higher gold prices are expected to continue driving earnings in the near future amid market volatility and economic uncertainties.

Debt Cut &amp; Strong Liquidity

Barrick is gaining from debt reduction. The company reduced its total debt by 3.2% year over year to $5.5 billion at the end of 2019. Also, it has a strong liquidity position and generates healthy cash flows, which positions it well to benefit from development, exploration and acquisition opportunities. At the end of 2019, Barrick’s cash and cash equivalents surged 111% year over year to $3.3 billion.

Key Growth Projects

Barrick is expected to benefit from major exploration programs. The company’s growth projects across Turquoise Ridge, Goldrush and Cortez Deep South in Nevada are currently in execution. Construction of the third shaft at Turquoise Ridge is advancing according to schedule and is expected to deliver additional value. The Deep South project is also expected to contribute to Cortez’s production this year. Also, the combination of Turquoise Ridge and Twin Creeks delivers a tier-one asset with another in the making at Goldrush. Notably, Turquoise Ridge significantly drove performance of the Nevada Gold Mines in fourth-quarter 2019. &nbsp;

Last month, Barrick also announced that the proposed expansion of the Pueblo Viejo gold mine will boost the mine life and also contribute to the economy of Dominican Republic till 2040 and beyond. The project will require an initial investment of $1.3 billion for expansion of the process plant and the tailings facility. The investment will extend the mine’s life and unlock potential to increase exports by $22 billion. The Pueblo Viejo expansion will also enable the mine to exploit the lower grades in the ore body.

Estimates Moving North

Earnings estimate revisions have the greatest impact on stock prices. Earnings estimates for Barrick for the first quarter and 2020 have moved up in the past two months. Over this period, the Zacks Consensus Estimate for first-quarter earnings moved up 5.6% while 2020 earnings estimates rose 4.3%. Further, the consensus mark for 2020 earnings is currently pegged at 72 cents per share, which suggests year-over-year growth of 41.2%.” data-reactid=”29″>

Higher Gold Prices

The coronavirus pandemic has led to a surge in gold prices, driven by the demand for safe-haven investments. Further, declining oil prices and geopolitical tensions are triggering demand for gold.

Moreover, the company’s average realized price of gold rose 21.3% year over year in fourth-quarter 2019 and boosted margins. Higher gold prices are expected to continue driving earnings in the near future amid market volatility and economic uncertainties.

Debt Cut & Strong Liquidity

Barrick is gaining from debt reduction. The company reduced its total debt by 3.2% year over year to $5.5 billion at the end of 2019. Also, it has a strong liquidity position and generates healthy cash flows, which positions it well to benefit from development, exploration and acquisition opportunities. At the end of 2019, Barrick’s cash and cash equivalents surged 111% year over year to $3.3 billion.

Key Growth Projects

Barrick is expected to benefit from major exploration programs. The company’s growth projects across Turquoise Ridge, Goldrush and Cortez Deep South in Nevada are currently in execution. Construction of the third shaft at Turquoise Ridge is advancing according to schedule and is expected to deliver additional value. The Deep South project is also expected to contribute to Cortez’s production this year. Also, the combination of Turquoise Ridge and Twin Creeks delivers a tier-one asset with another in the making at Goldrush. Notably, Turquoise Ridge significantly drove performance of the Nevada Gold Mines in fourth-quarter 2019.  

Last month, Barrick also announced that the proposed expansion of the Pueblo Viejo gold mine will boost the mine life and also contribute to the economy of Dominican Republic till 2040 and beyond. The project will require an initial investment of $1.3 billion for expansion of the process plant and the tailings facility. The investment will extend the mine’s life and unlock potential to increase exports by $22 billion. The Pueblo Viejo expansion will also enable the mine to exploit the lower grades in the ore body.

Estimates Moving North

Earnings estimate revisions have the greatest impact on stock prices. Earnings estimates for Barrick for the first quarter and 2020 have moved up in the past two months. Over this period, the Zacks Consensus Estimate for first-quarter earnings moved up 5.6% while 2020 earnings estimates rose 4.3%. Further, the consensus mark for 2020 earnings is currently pegged at 72 cents per share, which suggests year-over-year growth of 41.2%.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Barrick Gold Corporation Price and Consensus” data-reactid=”30″>Barrick Gold Corporation Price and Consensus

Barrick Gold Corporation Price and Consensus

Barrick Gold Corporation price-consensus-chart | Barrick Gold Corporation Quote

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Zacks Rank &amp; Other Key Picks

Barrick currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space are Novagold Resources Inc. NG, Franco-Nevada Corporation FNV and Newmont Corporation NEM. While Novagold sports a Zacks Rank #1 (Strong Buy), Franco-Nevada and Newmont carry a Zacks Rank #2. You can see&nbsp;the complete list of today’s Zacks #1 Rank stocks here.

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 113.1% in the past year.

Franco-Nevada has an expected earnings growth rate of 17.6% for 2020. Its shares have returned 40.6% in the past year.&nbsp;&nbsp; &nbsp;

Newmont has an expected earnings growth rate of 83.3% for 2020. The company’s shares have gained 39.4% in the past year.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now&gt;&gt;” data-reactid=”56″>Zacks Rank & Other Key Picks

Barrick currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space are Novagold Resources Inc. NG, Franco-Nevada Corporation FNV and Newmont Corporation NEM. While Novagold sports a Zacks Rank #1 (Strong Buy), Franco-Nevada and Newmont carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 113.1% in the past year.

Franco-Nevada has an expected earnings growth rate of 17.6% for 2020. Its shares have returned 40.6% in the past year.    

Newmont has an expected earnings growth rate of 83.3% for 2020. The company’s shares have gained 39.4% in the past year.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
&nbsp;
Newmont Goldcorp Corporation (NEM) : Free Stock Analysis Report
&nbsp;
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
&nbsp;
To read this article on Zacks.com click here.
&nbsp;
Zacks Investment Research” data-reactid=”57″>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Newmont Goldcorp Corporation (NEM) : Free Stock Analysis Report
 
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

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BDC launches matching investment program for Canadian VC-backed companies affected by COVID-19 – BetaKit

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According to a letter shared by the Canadian Venture Capital and Private Equity Association (CVCA), BDC Capital today launched the BDC Capital Bridge Financing Program meant to support venture-backed companies with matching investments.

The idea behind the program is to support Canadian companies impacted by COVID-19 that may not qualify for many of the existing federal government relief measures. Through the program, BDC is set to invest alongside venture firms and, according to the CVCA, BDC Capital will also accelerate more capital into General Partners (GPs) in Canada as well as increase its co-investment activity.

According to the CVCA letter sent to members and obtained by BetaKit, BDC Capital, the investment arm of the Business Development Bank of Canada, may match, via a convertible note, current financing rounds being raised through “qualified existing and/or new investors made in an eligible company.”

The program is something that the CVCA has been calling for, along with a number of other measures it hoped government would take to better support the innovation sector. Last week, The Logic reported that such a program was in the works and sources that spoke to BetaKit on background confirmed that BDC and the CVCA had been in talks and that a program much-aligned with the CVCA’s recommendations was imminent. Notably, BDC Capital executive vice president Jérôme Nycz is on the board directors for the CVCA.

In its letter, the CVCA noted it is pleased that BDC Capital has launched the program, adding that it is “ideal for high potential companies who have investor syndicates that are willing to support them.”

According to the letter, in order to be eligible companies must be Canadian-based, venture-backed, and have raised at least $500,000 in external capital before applying. Importantly, companies must also be specifically impacted by COVID-19.

It is noted that any matching investment from BDC Capital will be subject to due diligence review, agreement on terms of the investment, and approval by a BDC investment committee.

The CVCA claimed BDC Capital has already been in touch with some of its investment partners, but all venture capital firms are welcome to see if they are eligible for the program. Startups are being encouraged to speak to their shareholder or investors and companies directly in BDC Capital’s portfolio should speak to their partner.

BetaKit has reached out to BDC Capital and the CVCA for comment.

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Province announces $2 billion investment in job creation – Lethbridge News Now

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By accelerating the capital plan, significant additional work will be undertaken. This includes $140 million for transportation projects and includes an additional $60 million for operating, which covers work repairing potholes across the province.

“These infrastructure investments will be focused on projects that can be actioned quickly. By doubling our capital maintenance and renewal project funds, we will deliver much-needed improvements to important assets, keep companies and most importantly, keep Albertans working,” Kenney said in a provincial release.

“As the weather improves and buildings are empty, now is the perfect time for us to act.”

114 projects are currently in planning and/or in design. There are also 95 projects currently in construction, including 27 schools and nine bridge and road projects, not including capital maintenance and repair.

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