TREASURIES-U.S. yields tumble as China trade deal already priced in

    * China, U.S. agree on text of Phase one deal
    * U.S., China to cancel new tariffs on each other's goods
    * China to buy more U.S. goods and services
    * U.S. yield curve steepens as trade worries ease
    * U.S. retail sales rise less than expected

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 13 (Reuters) - U.S. Treasury prices rose on
Friday, pushing yields sharply lower, as investors shrugged off
news the United States and China have agreed on a preliminary
trade deal, cutting back some U.S. tariffs in exchange for more
Chinese purchases of American agricultural products and other
goods. 
    Treasury prices had advanced in earlier trading, as
investors bought them back after steep falls the previous
session. 
    Analysts said the deal has largely been priced in, ending
weeks of back-and-forth speculation about the two countries'
trade negotiations.
    Under the phase one trade agreement, no new tariffs will be
applied on both Chinese and U.S. products on Sunday. The United
States will also modify its tariffs on Chinese goods in a
"significant way," while China has agreed to buy $32 billion in
additional agricultural goods over the next two years.

    "For the most part, this is the average of what the
pessimists and the optimists have priced in," said Guy LeBas,
chief fixed income strategist at Janney Montgomery Scott in
Philadelphia.
    "The actual news has not moved Treasury valuations much.
Also keep in mind that the interest rate market has priced in a
lot of these yesterday," he added.
    On Thursday, news reports already touted an agreement in
principle of a "phase one" trade deal with China, with the
United States offering to cut tariffs on certain Chinese goods
by 50% and suspending tariffs on $160 billion in goods scheduled
for Sunday.
    U.S. Treasury yields rallied to four-week highs on the news.
    Dan Heckman, senior fixed income strategist, at U.S. Bank
Wealth Management in Kansas City, Missouri was skeptical,
however, of further trade progress ahead of a presidential
election.
    "It has taken us a number of years to get to phase one," he
said.
    In afternoon trading, the yield on the U.S. 10-year note
 fell to 1.819% from 1.899% late on Thursday.
    Yields on 30-year bonds dropped to 2.254% from
2.321% on Thursday.
    U.S. two-year yields, meanwhile, were down at
1.599%, from Thursday's 1.67%. 
    With trade concerns on the back burner, the yield curve
steepened, with the spread between the two-year and 10-year note
yields rising to as much as 26 basis points, the
widest gap in four weeks.
    "The main near-term impact of the phase one deal, assuming
it actually gets signed, is that it removes the threat of final
consumer tariffs and adds to the sense that the downside risks
to the economy are fading," said Michael Pearce, senior U.S.
economist, at Capital Economics in New York.
    The anticipation of a trade deal has overshadowed a
lackluster retail sales report, which showed a
lower-than-expected 0.2% increase in November. That
could negatively affect economic growth in the fourth quarter,
analysts said.
    
      December 13 Friday 2:50 PM New York/1950 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             1.5325       1.5638    -0.008
 Six-month bills               1.525        1.5622    -0.016
 Two-year note                 99-207/256   1.5996    -0.070
 Three-year note               100-4/256    1.6196    -0.077
 Five-year note                99-74/256    1.6499    -0.086
 Seven-year note               99-40/256    1.7543    -0.085
 10-year note                  99-100/256   1.8174    -0.082
 30-year bond                  102-172/256  2.2517    -0.069
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         3.00         1.50    
 spread                                               
 U.S. 3-year dollar swap        -1.50         1.00    
 spread                                               
 U.S. 5-year dollar swap        -2.75         0.50    
 spread                                               
 U.S. 10-year dollar swap       -7.25        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -32.00        -0.75    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve
Orlofsky and Nick Zieminski)
  

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Canada readies 2nd phase of air passenger rights as holiday travel season looms

Federal regulators are hoping a wave of new air passenger rights arriving this weekend will take the humbug out of holiday travel.

New rules will take effect on Sunday affecting flight delays and cancellations, including requiring airlines to seat parents beside or near their children at no extra cost, and compensate flyers for delays and cancellations within an airline’s control. Delays resulting from weather or mechanical issues are exempted.

The regulators are also promising public awareness help in the face of polling that suggests many people boarding flights don’t know about the new regime.

This is the second phase of passenger-rights rules. The first ones landed in mid-July and required airlines to compensate and respond to tarmac delays, denied boardings and lost or damaged luggage.

Transport Minister Marc Garneau’s mandate letter also shows he is to look at a much broader change to how Canada’s airports operate.

The marching orders from Prime Minister Justin Trudeau include making planes and trains more accessible; making Canada’s airports more efficient and accountable to travellers; and set standards to limit the amount of time travellers spend waiting at airport security.

“The model that has existed with our airport authorities for over 20 years has been a very good model, but it’s 20 years old and the world has changed,” he said.

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Saint John police issue warning after fraudulent gift cards begin circulating in N.B.

Saint John police are issuing a reminder to anyone purchasing gifts cards to be diligent when they do so after officers were alerted to some with tampered packaging.

“In most cases, the cards are either removed from the store and brought back or taken to another part of the store and then returned to the shelf once they have been altered with,” Const. Duane Squires said in a press release.

When the packaging around the card is opened, a fraudulent barcode is then slipped in over the top of the real barcode.

The fraudulent card will then have an additional barcode at the top of the card, which scans as a different card.

“A little strip of whiteout is over one bar of the original barcode, so the cashier will automatically activate the fraudulent barcode,” said Squires.

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Former Winnipeg sportscaster teaches healthy lifestyle with children’s book series

A one-time Winnipeg sportscaster has taken her extensive knowledge of the field and turned it into a series of educational children’s books.

The Lucy Tries Sports series is the brainchild of author Lisa Bowes, who told 680 CJOB she was inspired by the top-level sportspeople she met throughout her broadcasting career.

“It’s just that resilient, courageous, brave character, and she really appeals to all kids.”

And it’s not just kids who like the series. Bowes’ books have earned accolades from some of the country’s top athletes and coaches, including Calgary Flames captain Mark Giordano and decorated Olympian Hayley Wickenheiser.

“We think about what sport can give us — really just being active, for our physical health. We then expand it to how we pick up leadership skills, the ability to work with each other in a team environment,” said Bowes.

“It really breaks my heart when the little ones are not able to access it or just not able to have that experience.”

The series features an empowering lead character and her diverse group of friends, trying their hands at a wide range of sports, from hockey and basketball to luge and short-track speedskating.

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Exclusive: Hudson's Bay's take-private deal falls short in shareholder vote – sources

(Reuters) – Saks Fifth Avenue owner Hudson’s Bay Co (HBC.TO) has fallen short in securing enough shareholder support for a C$1.9 billion($1.4 billion) deal to take the department store operator private, people familiar with the matter said on Friday.

A buyout consortium of Hudson’s Bay investors led by its executive chairman Richard Baker did not win enough votes from other company shareholders by a Friday morning deadline for the deal to go through, the sources said. The sources cautioned that shareholders are allowed to change their minds through Dec. 17, when a special meeting of shareholders is planned.

The buyout consortium has 57% voting control over the company, but was not allowed to participate in the vote under the terms of the agreement with a special board committee that negotiated the deal on behalf of Hudson’s Bay.

The consortium’s next steps were not immediately clear.

The sources asked not to be identified because the matter is confidential. Spokespeople for Hudson’s Bay and Baker’s consortium did not immediately respond to requests for comment.

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SoftBank’s China strategy wobbles as key bets disappoint

HONG KONG/BEIJING (Reuters) – For SoftBank Group Inc, financial technology firm OneConnect’s IPO should have been a vindication of an aggressive China investing strategy.

Instead, embarrassed bankers had to slash the offering size and cut its price as investors baulked at a business model seen too reliant on majority owner Ping An Insurance. The IPO valued OneConnect at $3.7 billion, about half its worth last year when SoftBank’s Vision Fund invested $100 million, and its stock was down slightly in its debut on Friday.

OneConnect Financial Technology is just one of many China bets placed by the Japanese investment giant or its massive Vision fund which have run into trouble. That’s added to global woes for SoftBank CEO Masayoshi Son, under fire for bad judgement and insufficient due diligence, exemplified by U.S. office-space startup WeWork’s disastrous IPO attempt and subsequent bailout.

In ZhongAn Online P&C Insurance Co Ltd’s 2017 IPO, for example, SoftBank ploughed in $550 million as a cornerstone investor. But the deal was seen by some investors as way overvalued and now trades at about half its IPO price.

Its unlisted portfolio has also had problems. The Vision Fund in February invested $1.5 billion in Guazi.com, valuing the second-hand car dealing platform at more than $9 billion.

But a $500 million funding round for Guazi.com in the first half of the year failed to get off the ground, people with knowledge of the fundraising said.

The people, who were not authorized to speak to media and declined to be identified, said potential investors thought it was too pricey and were put off by its lack of profits in a sector where sales have been declining.

Guazi.com said in a statement that talks for new funds were advanced, investors included the Vision Fund and other top international investment institutions and that it expected to be profitable in the fourth quarter.

In fairness to SoftBank, many China IPOs have stumbled, hurt by a sharp slowdown in economic growth and trade tensions with the United States.

But investors and some bankers looking at China-related deals say SoftBank’s involvement, once a sign of promising prospects, was now viewed as a red flag that a company was likely overvalued.

“SoftBank has become a signal that the market has peaked,” said one person involved in the OneConnect IPO.

SoftBank declined to comment on its investments in Chinese companies for this article.

OTHER PROBLEMS

Other big bets like TikTok owner ByteDance and artificial intelligence firm Sensetime are threatened by the fallout from the U.S.-China trade conflict. The Vision Fund has invested roughly $1 billion in both, sources have said.

ByteDance is entangled in a U.S. national security review over how it handles U.S. customer data.

Sensetime in October was added to the U.S. “entity list” which bars it from buying U.S. components without U.S. government approval, over its alleged involvement in human rights abuses in China’s Xinjiang.

Sensetime has countered it abides by all relevant laws of jurisdictions in which its operates and that it has been actively developing an AI code of ethics.

Ride-hailing company Didi Chuxing, one of SoftBank’s biggest China bets with $11.8 billion invested, appeared to have a bright future after U.S. rival Uber traded its China business for a stake in Didi.

But the rape and a murder of a Didi passenger by her driver has dented the company’s image, and its IPO timetable remains unclear after Uber valuations slid.

The Vision Fund opened a China office this year led by former Silver Lake managing director Eric Chen. Two sources familiar with the operation told Reuters that the pace of hiring for the China team has been slow, though SoftBank says the team has grown a lot since March to include about 20 investment professionals.

One source said Chen had scaled back the size of the deals he was looking at, now focusing on investments of around $50 million compared to those of $200 million-$300 million.

SoftBank declined to comment.

It’s all a far cry from just two years ago, when SoftBank and the Vision Fund were ramping up. Son had made a killing with an early investment in Alibaba – a stake now worth $140 billion – and the China tech business was booming.

Then, Son’s penchant for splashy checks to help startups grow fast and quickly vanquish rivals was in full force – as evidenced by a meeting with Chinese online medical platform Ping An Good Doctor in late 2017 to discuss pre-IPO fundraising.

“How much do you want to raise in the pre-IPO round and via IPO? “ Son asked Good Doctor’s CEO Wang Tao, according to sources.

Wang told him it would be $300 million and $1 billion respectively.

“How about I give you $1 billion and you drop the listing plans?” Son said.

Wang later decided not to take him up on the $1 billion, receiving instead $400 million from the Vision Fund in a pre-IPO round before listing in Hong Kong last year.

In contrast to some of SoftBank’s other China investments, its stock has made progress after a rocky start, however, climbing and mostly staying above its IPO price since October.

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UN renews agency supporting Palestinian refugees

UNRWA’s mandate overwhelmingly renewed for another three years, despite opposition by US and Israel.

    The United Nations General Assembly has overwhelmingly renewed the mandate for a UN agency supporting Palestinian refugees for another three years amid misconduct allegations and a cash shortfall triggered by a halt in US funding.

    The mandate of the United Nations Relief and Works Agency for Palestine Refugees (UNRWA) was extended on Friday until June 30, 2023, with 169 votes in favour and nine abstentions. The United States and Israel voted against.

    More:

    • Ex-UNRWA chief says agency ‘victim of campaign to undermine it’

    • UNRWA chief of staff leaves over ‘unacceptable email’

    • Ethics report accuses UNRWA leadership of abuse of power

    UNRWA, which as established in 1949, provides education, health and relief services as well as housing and microfinance assistance to more than five million registered refugees in the occupied West Bank and East Jerusalem, the besieged Gaza Strip as well as in Jordan, Lebanon and Syria.

    The agency has faced budgetary difficulties since last year, when the US – its biggest donor – halted its aid of $360m per year.

    The Palestinian group Hamas, which administers the besieged Gaza Strip, hailed the UN vote as a defeat for the US and a failure of its attempts to pressure UN member-states against UNRWA.

    “We welcome the decision to renew the international mandate to UNRWA and we see it as another failure to hostile US policies to the Palestinian rights,” Hamas official Sami Abu Zuhri told Reuters News Agency.

    ‘A humanitarian lifeline’

    Last month, UNRWA Commissioner-General Pierre Krahenbuhl resigned amid an investigation into misconduct allegations.

    A confidential internal agency ethics report, first reported on by Al Jazeera in July, accused Krahenbuhl and his “inner circle” of “abuses of authority for personal gain, to suppress legitimate dissent and to otherwise achieve their personal objectives”.

    It claimed that members of the inner circle “engaged in misconduct, nepotism, retaliation … and other abuses of authority” following the fallout from Washington’s decision to cut its contributions to UNRWA.

    Krahenbuhl has denied wrongdoing and said his agency was the victim of a political campaign designed to undermine it.

    Following Al Jazeera’s report, Belgium, Netherlands and Switzerland suspended their contributions to UNRWA.

    The US has advocated shifting the agency’s relief services to refugee host countries.

    But UNRWA counters it provides a humanitarian lifeline and that it safeguards and advances Palestinians’ rights under international law.

    Hanan Ashrawi, a senior Palestine Liberation Organization official, praised the UN vote on Friday and said it was the UN’s responsibility to combat what she said were US and Israeli attacks on Palestinian refugees.

    “All attempts at trying to limit UNRWA’s mandate or defund it or attack it have failed, and we hope that the international community will continue to come to the rescue,” she said.


    Inside Story

    United Nations: Time for reform?

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    Boeing bows out of multibillion-dollar Minuteman III replacement competition

    WASHINGTON (Reuters) – Boeing Co (BA.N) has decided it will not compete as a prime contractor to replace the Pentagon’s aging U.S.-based Minuteman III missile system, paving the way for Northrop Grumman Corp (NOC.N) to win a contract worth tens of billions of dollars.

    Friday marked the deadline to submit proposals to continue work on the replacement of the nearly half-century-old intercontinental ballistic missile (ICBM) system as the military embarks on a costly modernization of its aging atomic weapons.

    Boeing said in a statement that it was disappointed it was unable to submit a bid. Northrop did not immediately return a request for comment.

    Boeing’s decision not to enter a bid as a prime contractor had been foreshadowed this summer in a letter from the chief executive of Boeing Defense Space and Security, Leanne Caret, to Air Force leadership, saying Northrop’s 2018 purchase of solid rocket motor maker Orbital ATK might make it difficult for Boeing to compete on cost.

    Orbital is the top producer of the solid fuel rocket motors generally used in Minuteman III and similar missiles.

    The Pentagon’s Cost Assessment and Program Evaluation office has said the total cost to replace Minuteman III could top U.S. $85 billion.

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    Zimbabwe's Mnangagwa says no going back to dollarisation

    HARARE (Reuters) – Zimbabwe’s President Emmerson Mnangagwa vowed on Friday not to revert to using the U.S. dollar after a new local currency plunged against the greenback since its introduction this year, fuelling inflation and economic hardship.

    The government ended a decade of dollarisation in June, partly to stem demand for the increasingly scarce currency, a decision economists estimate pushed inflation to 440%, eroding wages and savings.

    Economists, businesses and the opposition have accused the government of rushing to reintroduce the Zimbabwe dollar without the backing of foreign currency reserves and say it should allow the use of U.S. dollar and other currencies to tame soaring prices.

    “No progressive nation can progress without its own currency. However, we have so many among our people, who fight this decision. We will not revert back to a basket of currencies, never, never, never,” Mnangagwa told ZANU-PF members at an annual party conference outside the capital.

    There is little foreign investment in the country, gripped by its worst economic crisis in a decade, and export earnings and remittances from the diaspora have fallen. The resulting shortage of U.S. dollars to pay for imports has led to fuel and electricity shortages, hobbling businesses including in the important mining sector.

    Although it is now illegal to use foreign currency to buy local goods, many people still take the risk and some businesses charge in both U.S. and Zimbabwe dollars.

    The Zimbabwe dollar has lost 61% of its value against the greenback since its re-introduction. Analysts expect it to weaken further as the government scrambles for U.S. dollars to crank up imports of grain following a severe drought.

    Hopes have faded that Mnangagwa, who took over from late President Robert Mugabe after a coup two years ago, can quickly revive the economy, which is on the verge of recession with millions facing hunger.

    Mnangagwa said his government was pursuing difficult economic reforms, including measures to reduce the budget deficit to single digits.

    He said violent fuel protests witnessed in January and calls by labor unions for strikes over pay were part of an anti-government plot to derail economic reforms and undermine his rule.

    “I want to commend the people of Zimbabwe for rejecting the machinations by those with unbridled political ambitions who are even prepared to use violence, divisions and disunity and violent demonstrations to acquire power,” he said.

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    TD Maria Bailey wins €150 at Fine Gael super draw

    Swing-gate TD Maria Bailey has pocketed €150 after winning a cash prize at the Fine Gael super draw.

    At a raffle draw in McGrattans Bar in Dublin City Centre on Thursday, Ms Bailey’s name was drawn for one of the smaller cash prizes of €150. The top prize of €20,000 went to the brother of Noel Rock’s partner. 

    Fine Gael sold 11,500 super draw tickets this year at €80 a head which means the party raised €920,000 from the political fundraiser.

    The small win for the embattled Ms Bailey comes after Fine Gael removed her from the party’s general election ticket in Dun Laoghaire.

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    The one-term TD had been at the centre of a controversy over her decision to take a personal injury case after she fell off a swing in a Dublin City Centre hotel.

    It later emerged court documents suggested she could not run for three months after the fall while social media posts showed she ran a half marathon within weeks of the incident.

    Taoiseach Leo Varadkar ordered a review of Ms Bailey’s personal injury case which found she had “over-stated the impact of her injuries on her running”.

    The inquiry said it was unlikely a court would concluded that she “deliberately sought to mislead” about the impact of her injuries.

    However, the Taoiseach said he could not “reconcile” with the “inconsistencies” in Ms Bailey’s account of the incident to him and in her media interviews.

    She was removed as chair of three different Oireachtas committees after the Fine Gael review was given to the Taoiseach. However, he decided she should be allowed to remain on Fine Gael’s general election ticket.

    Ms Bailey’s Dun Laoghaire branch subsequently passed a motion calling for the constituency’s ticket to be reviewed by the party’s national executive.

    The decision was eventually taken to remove her from the ticket and the Taoiseach said private opinion poll data influenced the move to deselect her from the party’s general election campaign.

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