30-year US Treasury bonds return amidst strong demand
New York, USA: 30-year US Treasury bonds made their appearance after more than four years and in the first auction attracted surprisingly strong demand. The sale allowed the federal government to borrow US$14bn at a yield of up to 4.53 percent, almost a percentage point lower than it paid at the previous auction in 2001.

One indication of strong demand was that 65 per cent of the bids came from bidders other than the brokerage firms that are required to bid at auctions.

The auction came after the Bush administration reversed its policy on sales of 30-year bonds, amid rising government deficits. It had halted the auctions because it believed that it was likely to pay less if it borrowed short term and then continuously rolled over the debt by issuing new short-term securities.

The last issue of 30-year Treasury bonds in August 2001 had taken place in a country that was very different now from what it looks like now. Then projections called for the United States government to continue to run surpluses even with the tax cuts that President Bush was pushing through Congress, and there was talk of a bond shortage.

Now the US government's budget is deep in deficit. The Sept. 11 terrorist attacks were followed by wars in Afghanistan and Iraq, and spending on other problems rose as well. The 2006 deficit is forecast by the Bush administration to be more than $400 billion. The Governments tax cuts are one of the main reasons, along with several others, that have now resulted in the long-term bonds making a fresh appearance.

Today's auction for US$14bn in 30-year bonds will mature in February 2036, and overall received US$28.7bn in bids. The bonds will have a coupon of 4.5 per cent.
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Insurer AIG apologizes for fraud — agrees to a US$1.6bn settlement
New York, USA: The American International Group, one of the world's largest insurers, yesterday apologized for deceptive business practices extending as far back as two decades, and agreed to pay US$1.64bn to settle charges of accounting fraud. The penalty is one of the steepest paid by a US corporation.

AIG said it "regrets and apologises" for the misconduct. It was accused of manipulating its books to make AIG appear in better financial health than it actually was.

The settlement does not include former AIG chief executive Maurice "Hank" Greenberg and former finance chief Howard Smith, who are still under investigation, and have denied wrongdoing.

Under the settlement, reached with various arms of the US and State Governments, A.I.G. acknowledged that it had deceived the investing public and regulators. In its settlement, the company resolved allegations that it had participated in bid-rigging schemes and paid insurance brokers to steer business its way, used fraudulent insurance transactions to bolster the quality and quantity of its earnings and underreported to state insurance departments the amounts of workmen's compensation premiums it had collected, on which it owed taxes.

In its apology, A.I.G. said, "Providing incorrect information to the investing public and regulators was wrong and is against the values of our current leadership and employees." The company said it is committed to business practices "that provide transparency and fairness in the insurance markets."

Both the settlement and the apology are an attempt to dump the legacy of Greenberg, its long-time chief executive, who was removed by A.I.G.'s board last March. Greenberg remains under investigation by the Securities and Exchange Commission and the Department of Justice and faces a lawsuit by the Attorney General's office in New York.

Under the terms of the settlement, A.I.G. will pay US$200mn in fines and penalties and put an additional $1.4 billion into three funds to benefit victims of the company's deceptions. One fund, totaling US$800mn, will be available to investors who lost money in A.I.G. stock after its accounting irregularities were disclosed. Another US$375mn fund will repay former customers who may have paid too much to buy A.I.G.'s insurance policies because of the bid-rigging, and a third fund, consisting of US$343mn, will go to the states that A.I.G. cheated by underpayment of taxes relating to workmen's compensation premiums earned in those states.

Last year, A.I.G. restated its financial results for five years beginning in 2000, stating that improper accounting during that period had inflated the company's earnings by more than US$3bn.
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Tesco to enter U.S. through convenience stores
London, UK: Tesco Plc, the U.K.'s largest retailer, will enter the U.S. next year by opening convenience stores on the country's West Coast. England-based Tesco plans to spend as much as $435 million a year to add to its business.

Hamstrung by planning regulations from expanding its U.K. supermarkets, Tesco is opening stores in China, Hungary and Turkey.

Analysts said that the move by the UK retailer may well be a preliminary test as competition from giant US retailers such as Wal Mart have turned the US market into a graveyard for U.K.

retailers. If all goes well Tesco may well graduate its US operation to a large one with the help of a big acquisition.

The U.K. company has a market value of US$44bn, less than a quarter of Wal-Mart's size. Earlier, the retailer entered China in 2004, following Wal-Mart and Carrefour SA. Tesco now operates in twelve countries outside the U.K. and has 2,365 stores worldwide.

Tesco Express stores, the format through which Tesco plans to launch its US operations, are located in town centers and at gas stations and sell goods such as bread and prepared meals. The stores are aimed at workers who have less time to shop and prepare food.

Convenience retailing is one of the fastest- growing parts of the U.K. food industry, worth US$40bn a year.
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Renault's Ghosn opts for eco-friendly growth
Brussels: Renault chief executive Carlos Ghosn, yesterday announced plans to turn around the ailing French carmaker, saying that half the cars made by the company will be able to run on a mixture of petrol and ethanol by 2009.

Ghosn, renowned as a "cost-killer" when he ran Nissan, laid some fears to rest by announcing a strategy of growth in sales, profits and eco-friendly vehicles rather than the feared job losses and plant closures.

His strategic presentation set targets of increasing global sales by 800,000, launching 26 new models and achieving a six per cent profit margin in the next three years.

Ghosn, who took over responsibilities in May 2005 as the parent company's chief executive, after his spectacularly successful stint at Nissan, said that by 2009 all its diesel cars would be able to operate with 30 per cent diester, produced from vegetable or animal oil. By 2008 it would sell a million cars capable of emitting less than 140g of CO2 per kilometre, with a third of these emitting less than 120g.

Ghosn admitted that Renault was "fragile" but "not in crisis" even as he glossed over the firms 37 per cent slump in Group operating profits last year. He announced plans to launch 26 new models including re-entering the luxury end of the car market with a new Laguna and make the company's first sports utility vehicles, 4x4s and other niche models.

He said Renault should boost overseas sales from 27% to 37% of total volume by 2009, with new models helping to increase sales to 3.33m a year. With a 44% stake in Nissan, Renault aims to ape the Japanese firm's record by halving investment costs and raising capacity-utilisation at its French plants from 60% to 78%.
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