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Amid uncertainty, the United States has ended the war in Iraq

In a formal ceremony officially ending the U.S. war in Iraq, Defense Secretary Leon Panetta told soldiers that they leave with pride, saying they could be "secure in knowing that your sacrifice has helped the Iraqi people to cast tyranny aside." The nearly nine year long war cost about $800 billion and resulted in 4,500 U.S. soldiers dead and 32,000 wounded. Over 100,000 Iraqis died during the course of the war. At the conflict's peak in 2007, there were 170,000 U.S. forces in Iraq with 505 bases. The remaining 4,000 U.S. troops will leave within the next two weeks. However, 4,000 soldiers will be stationed in neighboring Kuwait, assisting with finalizing the departure as well as staying positioned to return to Iraq if the need arises. About 150 soldiers will remain in Iraq along with Pentagon civilians at the U.S. Embassy's Office of Security Cooperation. Both President Obama, who met with Iraqi Prime Minister Nouri al-Maliki this week, and Panetta confirmed intentions to maintain strong diplomatic relations with Iraq. With a continued insurgency, political uncertainty, and sectarian tension, the Iraqi public is divided over the withdrawal. Some claim the U.S. departure will leave a vacuum for increased insecurity. Others celebrate the withdrawal, saying the U.S. is "leaving behind killings, ruin, and mess."

Headlines  

  • An Islamist win is expected after the second round of Egyptian elections. Meanwhile, the ruling military released a draft of the presidential election law.
  • Defectors killed 27 Syrian security forces in the southern city of Dara'a, suggesting coordination by the armed insurgents in attacks.
  • Human Rights Watch released a report naming 74 Syrian commanders and officials, including President Assad, who issued detainments, torture, and "shoot to kill" orders.
  • New Tunisian President Moncef Marzouki asked for six months of political and social truce, claiming if conditions do not improve in that time he will resign.
  • After Israeli Prime Minister Netanyahu increased the authority of soldiers to clamp down on extremists, another mosque was set on fire prompting President Peres to meet with settler leaders.

Daily Snapshot

 

BAGHDAD, IRAQ - DECEMBER 14: An Iraqi Army special forces soldier (C) keeps watch at a women's art exhibition sponsored by Iraqi Parliament member Safi Asiheil in a posh Baghdad neighborhood on December 14, 2011 in Baghdad, Iraq. Iraq is transitioning nearly nine years after the 2003 U.S. invasion and subsequent occupation. American forces are now in the midst of the final stage of withdrawal from the war-torn country. At least 4,485 U.S. military personnel have died in service in Iraq. According to the Iraq Body Count, more than 100,000 Iraqi civilians have died from war-related violence (Mario Tama/Getty Images).

Arguments & Analysis

'Holding Libya together: security challenges after Qaddafi' (International Crisis Group)

"Until a more legitimate governing body is formed - which likely means until elections are held - and until more credible national institutions are developed, notably in the areas of defence, policing and vital service delivery, Libyans are likely to be suspicious of the political process, while insisting on both retaining their weapons and preserving the current structure of irregular armed brigades. To try to force a different outcome would be to play with fire, and with poor odds. But that does not mean nothing can be done. Some of the most worrying features of the security patchwork should be addressed cooperatively between the NTC and local military as well as civilian councils."

'In Iraq, a man of the shadows' (David Ignatius, Washington Post)

"Maliki's visit to Washington this week has been a time for taking stock of Iraq eight years after the U.S. invasion. What did America achieve in overthrowing Saddam Hussein and battling a stubborn insurgency? It brought a democracy, yes, but one shaped by the most basic and sometimes brutal facts of life -- allegiance to tribe, sect, clandestine organization. Maliki is a figure of all these immutable forces, a man of the shadows more than the sunlight. He seems to trust only those closest to him, and his efforts to form broad coalitions have failed. The trust deficit is nowhere more evident than in the energy sector, which should make Iraq fantastically rich but is still hobbled by a lack of basic legislation that would foster investment."

'Will Yemen's peace agreement hold?' (Ibrahim Sharqieh, The National Interest)

"While the agreement signals the start of a much-needed, highly anticipated transition in Yemen, challenges remain. The most difficult of these will be ensuring that the youth opposition in Change Square, the center of protests in the capital city of Sanaa, accept the legitimacy of the deal. Indeed, the parliamentary opposition represented by the JMP signed the accord with Saleh, and they don't necessarily have the support of the youth or the majority in the street. The youth opposition who began the current uprising ten months ago represent a real force in Yemen and will challenge any implementation of the agreement without their approval. In fact, the protesters are already questioning the agreement's legitimacy because it grants immunity to Saleh, a pardon they have always fought against. The question of whether the JMP had the right to grant Saleh immunity on behalf of, for example, the families of those who died in protests in the city of Taiz remains unsettled." 

Latest from the Channel

-- 'Kuwait's short 19th century' by Nathan J. Brown

-- 'Libya's constitutional balancing act' by Sean Kane

-- 'Will the GCC stay on top?' by Marc Lynch

 

TAMOORASIF

10:13 AM ET

December 16, 2011

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Two fixed-rate bonds issued over the summer were virtually ignored by the market - the two placements combined raised less than a billion dollars.

The variable-rate bond, GOJ VR 2022, raised a combined J$21.98 billion at its issue on August 8 and 24, far outperforming the November 8-9 placement at a coupon rate of 7.595 per cent payable up to next February.

The ministry has not said why that bond was placed on the market for a third time in search of unlimited subscriptions, but its proceeds would have helped to cover a Financial Gleaner estimated J$7 billion to J$8 billion of coupon payments due over the period November 14 to 24.

Ian Scarlett from the finance ministry's Debt Management Unit (DMU), said the DMU was satisfied with the funds raised from the recent issue - which was later quantified by the ministry's communications unit as J$5.95 billion. Brian Frazer of Scotia Asset Management concurred that the bond had a reasonable performance.

"Based on the low level of liquidity in the market during the time of that offer, I believe the take-up was reasonable," Frazer told the Financial Gleaner.

Still, the average take-up on the other four VR issues this fiscal year was J$14 billion, compared to less than J$6 billion on the third placement of VR 2022.

Brokers surveyed by the Financial Gleaner say investor interest was muted because of uncertainties regarding the stalled deal with the International Monetary Fund, and whether interest rate policy would change direction; and that the market is cautious about the debts the central government is amassing.

At least J$190 billion of maturities are payable in years 2013 and 2014.

The maturity profile of existing debt between 2016 and 2022 is also now seen as being too "tight", leaving the Government heavily exposed, brokers say. There is at least J$325 billion of maturities within that period, by Financial Gleaner estimate.

For the financial year to date, the Jamaican Government has raised J$72.1 billion from 12 placements, eight of which were reopened bonds, according to finance ministry disclosures on market issues since April 2011.

The majority of the subscriptions, J$59.4 billion, came from five variable-rate bonds; while six fixed-rate bond floats raised just J$12.7 billion.

The noted preference for VR issues comes as interest rates appearing to be stabilising after a period of sustained reductions. Indeed, a 12.875 per cent fixed-rate bond placed in July to mature in 2024 raised just J$465 million; it was reopened in September and fared even worse with an uptake of J$314.5 million.

The ministry said its new floats are being structured to tap into the market shift.

"If you look at the issue in September the market had very little appetite for it," said Scarlett, referring to the mere J$314.5 million take-up, the lowest so far this year.

Frazer and Scarlett say that there is a growing preference for variable-rate investments in recent times because investors expect to benefit from repricings - meaning they expect that interest rates could soon start ticking north.

"Interest rate levels are now very close to the October 2011 annualised inflation of 6.14 per cent," said Frazer.

Scarlett said there are signs in the monthly Treasury bill yields that interest rates have bottomed out.

The T-bill rates were flat in the past two auctions, with yields on all three tenors now huddled within a tight band of 6.22 per cent to 6.28 per cent.

The reset margins on the ministry's 10 VR bonds range between 1.0 per cent and 1.5 per cent.

The yields on variable bonds currently range between 7.34 per cent and 7.935, whereas fixed bonds are yielding 7.0 per cent to 11.95 per cent.

Frazer said the lack of progress on the stalled IMF agreement is creating uncertainty, which in turn could lead to investors demanding higher premiums.

"If left unresolved for any extended time, this may result in a decline in investors' confidence and an upward pressure on interest rates. Amidst this background, it would be prudent at this time to pursue variable-rate securities which will provide some hedge to fixed-income portfolios from decline in asset values, and at this same time offer attractive coupon compensation if rates should increase," the analyst said.

On Wednesday, yet another VR bond, the 2013A which was initially settled on August 3, was reopened for subscription from November 23 to 25. The offer appears to have replaced a planned fixed-rate issue that would have hit the market on November 23.

Indeed, the DMU up to week ago had been weighing whether to switch to a variable-rate offer, "because we have to respond to market and we are trying to raise cash to satisfy government housekeeping expenses," Scarlett said then.

The yields on variable bonds currently range between 7.34 per cent and 7.935 per cent, whereas fixed bonds are yielding 7.0 per cent to 11.95 per cent.

Frazer said investors are unlikely to take up a fixed-rate offer, unless it is of a short tenure and attractively priced above the current indicative yield curve.

The Government has paid out approximately J$39.7 billion to service its domestic debt, according to preliminary Central Government financial data to September 30.

Financial Gleaner calculations show an additional J$9.4 billion interest payments between October 1 and November 24; and that Government's next big round of domestic debt servicing will be in February 2012, when it will pay out as much as J$74 billion - comprising J$45 billion of bond maturities and J$28.9 billion in interest payments.

Asked about the strategy to fund the February payouts, the head of the DMU, Pamela McLaren, said the market would be tapped.

"The Government goes to market every month as part of their financing requirements

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