Freddie Mac cites hedging for 3Q loss
Freddie Mac won't seek additional funds from the U.S. Treasury Department and won't need to make a dividend payment to the government after reporting a half-billion dollar third-quarter loss stemming mostly from accounting for hedges against interest-rate risk.
The company, which has operated under U.S. conservatorship since it was seized along with rival Fannie Mae, the Federal National Mortgage Association, in 2008, had positive net worth of $1.3 billion as of Sept. 30, according to a statement released Tuesday. That means it won't need to add to the $71.3 billion in aid it has received since the financial crisis or the $96.5 billion it has sent to Treasury after regaining profitability.
Freddie Mac, the Federal Home Loan Mortgage Corp., uses derivatives to manage its exposure to interest-rate risk, which can create volatility that doesn't necessarily reflect the underlying economics of its business. In the third quarter, the company had derivative losses of $4.2 billion, mainly because of accounting treatment for hedged assets and liabilities as interest rates declined.
Under conservatorship, the two mortgage-finance companies are required to turn over to Treasury all profits above a minimum net worth threshold. The payments count as a return on the U.S. investment and not as a repayment for the bailout, leaving the companies with no mechanism to leave government control.
-- Bloomberg News
Factory orders slide 1% in September
WASHINGTON -- Orders to U.S. factories fell in September for a second straight month, with a key category that tracks business spending plans also losing ground.
Factory orders dropped 1 percent in September after a 2.1 percent decline in August, the Commerce Department reported Tuesday. A category that serves as a proxy for business investment spending slipped 0.1 percent.
The September result was led by a 36 percent fall in the volatile category of commercial aircraft. But the weakness was widespread across other categories such as primary metals, machinery and computers.
U.S. manufacturers have been squeezed this year as a strong dollar makes American products less competitive overseas. Weak economies in China and other key foreign markets have also cut into exports.
Orders for motor vehicles and parts edged up 0.4 percent, but demand in transportation overall was off 3.1 percent. Outside the volatile transportation sectors, orders were down 1.4 percent, the fifth drop in the past six months.
-- The Associated Press
Demand heavy as $50B in T-bills sold
The Treasury sold $50 billion of four-week bills, kicking off what's forecast to be the largest month of short-term debt sales in seven years after issuance shrank before the deadline to reach a compromise on the U.S. debt ceiling.
The $225 billion of bills expected to be sold this month is the most since the Treasury stepped up issuance during the financial crisis to help bail out banks as demand for the safest assets surged. Tuesday's sale is the biggest since December 2014.
The $50 billion of four-week notes sold at a rate of 0.07 percent, as investors submitted bids amounting to 3.46 times the amount of debt issued, a measure known as the bid-to-cover ratio. The supply comes as regulations designed to protect money-market mutual fund investors from unforeseen losses are pushing more asset managers into U.S. government securities.
"It's indicative of the market's demand for bills after two months of pretty steep pay-downs," said Thomas Simons, a government-debt economist in New York at Jefferies LLC, one of the 22 primary dealers that are obligated to bid U.S. debt sales. "One of the reasons it went so well was it was presenting some decent yield."
-- Bloomberg News
Deere to buy Monsanto's planter unit
Deere & Co., the world's largest maker of agricultural machinery, said it agreed to purchase Monsanto Co.'s Precision Planting LLC equipment unit as Deere accelerates its strategy to improve farmer efficiency and productivity with technology.
Through the deal, Moline, Ill.-based Deere will acquire facilities, the brand, the majority of the product portfolio including hardware, sensors and display systems and the majority of Precision Planting's employees, relationships with dealers and original equipment customers, the manufacturer said Tuesday in a statement. The purchase is expected to close in 60 to 90 days, after which Precision Planting will operate independently as a wholly owned subsidiary of Deere, according to the company. Terms were not disclosed.
The acquisition is the third precision agriculture deal Deere has announced in the past five weeks. On Monday, the company said it agreed to acquire Monosem, the European leader in precision planter manufacturing. On Oct. 8, Deere agreed to form SageInsights, a joint venture to further develop a cloud software platform called MyAgCentral developed by data and software firm DN2K for agricultural retailers and other consultants.
-- Bloomberg News
Business on 11/04/2015