B10| Friday, August 23, 2019 THE WALL STREET JOURNAL.
BANKING & FINANCE
and dominant mobile money
network. Ms. Rossiello’s com-
pany charged a flat rate of 3%,
and users got their money
nearly instantly. But BitPesa
struggled to gain popularity.
Only a handful of businesses
around the world accept bit-
coin. Learning how to acquire,
store and use it is still convo-
luted for most people—and all
but impossible for those who
don’t have internet access.
“It’s very difficult to build
frontier-market currency
products,” Ms. Rossiello said.
Libra will have one advan-
tage. Facebook is the largest
social network, with more
than two billion users, so the
cryptocurrency will easily be
able to get in front of a huge
pool of potential consumers. It
couldn’t be determined how
many Facebook users are un-
banked, but the opportunity
could be significant. Facebook
executive David Marcus, dur-
ing a July congressional hear-
ing, said fees were the biggest
problem for the unbanked.
With Libra, he said, “anyone
with a $40 smartphone”
would have access to afford-
able financial services.
The unbanked aren’t a
monolithic group, though. An-
other issue is understanding
local conditions. That was a
problem for many bitcoin pro-
moters who wanted to infuse
the cryptocurrency around the
world but stay in Silicon Valley.
In Mexico, for example,
more than half of all workers
are in the “informal economy,”
according to Mexico’s National
Institute of Statistics and Ge-
ography. They often run or
work for small, cash-based
businesses. “You have this vi-
cious cycle in which people
are barely surviving, they
can’t afford taxes, don’t want
to use bank accounts, and be-
cause of that, accept only
cash,” said Adalberto Flores,
the chief executive of Kueski, a
Guadalajara, Mexico, financial-
services startup.
Moving those workers to a
digital currency where every
transaction can be recorded
and taxed will be a challenge.
“They know the government
will track their expenses and
demand taxes,” Mr. Flores said.
Governments themselves
could be another roadblock.
Facebook and the Libra Asso-
ciation, the Swiss-based non-
profit that will govern the cur-
rency, have committed to
expanding the network only to
countries that allow the use of
cryptocurrencies. The govern-
ments of some of Facebook’s
largest markets, though, aren’t
sold on crypto’s benefits.FacebookInc. has an ambi-
tious goal for its proposed
cryptocurrency, Libra: to bring
financial services to the hun-
dreds of millions of people
world-wide who don’t use
banks or other traditional in-
stitutions. The cryptocurrency
sector has for years tried to
do the same and failed.
In the decade since bitcoin
was born, cryptocurrencies
have fascinated investors. But
the crypto industry has strug-
gled to get consumers to use it
for daily transactions, and the
bar for reaching unbanked
adults could be even higher.
The unbanked represent a
big potential customer base
for crypto. Roughly 1.7 billion
adults around the world don’t
have an account at a financial
institution or through a mo-
bile money provider, according
to the World Bank.
But getting people to use a
new monetary standard re-
quires more than just the un-
derlying software. It calls for
erecting infrastructure that al-
lows people to easily use cryp-
tocurrencies, working with
governments and tailoring ser-
vices to local cultures.
Elizabeth Rossiello learned
that lesson on the ground..
She founded payments proces-
sor BitPesa in 2014 with a plan
to use bitcoin as the underly-
ing technology for a new, digi-
tal-remittance business. With
a background in microfinance
and banking, she had experi-
ence, connections and backing.
Born in Queens, N.Y., Ms.
Rossiello moved her company
and family to Nairobi, Kenya,
and tried to build her network
from the ground up. She had
staffers in London sign up
Kenyan immigrants looking to
send money back home. Bit-
Pesa launched through a part-
nership with M-Pesa, the local
BYPAULVIGNA
Facebook’s
LibraBetson
The Unbanked
Home-builder shares are
fast approaching their highs
for the year, moving past steep
2018 losses thanks to a combi-
nation of falling mortgage
rates and firming housing data.
TheSPDR S&P Homebuild-
ers ETFis up 30% after rising
every day of the week so far,
putting it a hair’s breadth away
from surpassing its 2019 high
and well above the S&P 500’s
17% gain for the year. LGI
HomesInc., which focuses on
targeting first-time buyers, has
soared 77% this year, while fel-
low home builderLennarCorp.
has jumped 33% andKB Home
has risen 49%.
Both the index and the indi-
vidual stocks are outpacing the
S&P 500 for the month as well.
It is a sharp turnaround af-
ter fears about declining home
sales and broader market jit-
ters fueled a monthslong slide
among home-builder shares in
2018.
This year, investors have
found reasons to bet on theFacebook's daily active users,
quarterly
Source: the company
1.50
0
0.25
0.50
0.75
1.00
1.25
billion2016 ’17 ’18 ’19Bond yields10-year bond yieldsNations with at least $1
billion of 45-year or longer
bonds, since 1995Sources: FactSet (yields); Tullet Prebon (10-year yields); Refinitiv (ultralong issuances)NetherlandsSwitzerlandFranceJapanSpainItalyU.K.U.S.Germany6 mo. 1 year 2 3 4 5 6 7 8 9 10 15 306 mo. 1 year 2 3 4 5 6 7 8 9 10 15 30SwedenDenmarkNegative Positive Not issuedNATION
U.K.
France
Austria
Italy
Mexico
Spain
Belgium
Argentina
GreeceISSUANCE
$166.5B
17.4
12.0
10.8
5.1
4.7
3.5
2.5
2.2James Benedict/THE WALL STREET JOURNAL3–1012%JFMAMJJAJapanU.S.U.K.GermanyFranceIreland and Belgium each sold
€100 million of 100-year bonds
in privately placed deals in- Argentina sold $2.75 bil-
lion of that maturity in 2017,
while Austria sold €3.5 billion
of 100-year bonds that year
and followed with €1.25 billion
more in June.
Before the era of negative
interest rates, China sold 100-
year bonds in 1996, followed
by the Philippines in 1997 and
Mexico in 2010.
Some countries, including
the U.K., France, Belgium, Italy
and Spain have sold 50-year
bonds totaling roughly $130
billion since the start of 2014,
according to Refinitiv.
Ultralong bonds have a nat-
ural audience, in institutions
such as insurers that have
long-term liabilities and need
to match them with long-dated
assets. Many analysts contend
there is generally a dearth of
safe, long-term assets right
now, and that this shortage is
part of the dynamic that has
driven bond yields down so
sharply in 2019.
That said, investors have
some reservations about buy-
ing ultralong bonds. They can
be volatile and few are out-
standing, so liquidity, the ca-
pacity to buy or sell at listed
prices, can be fleeting. The
100-year bonds sold by Aus-
tria have traded at times 70%
above face value. Should
global interest rates begin to
climb, those gains could evap-
orate.
The value of Argentina’s
100-year bonds have fallen by
nearly half after Argentina’s
pro-business President Mauri-
cio Macri lost a primary this
month, indicating that he may
be defeated in October’s elec-
tion.
Of the roughly $15 trillion
of bonds with negative yields
globally, about $3 trillion was
sold at their offering with neg-
ative yields, while the rest fell
below zero as the securities
appreciated during the global
bond market rally. A bond’s
yield becomes negative when
its value in the market exceeds
its principal to be returned atmaturity and the sum of all its
future interest payments.
Some investors who buy
negative-yielding debt own it
as a hedge for other parts of
their portfolios. Holding bonds
with negative yields can also
be a more palatable option for
institutional investors who
face surcharges for keeping
deposits in a bank. Others may
buy negative-yielding bonds
because they believe their
prices will appreciate as eco-
nomic growth slows and infla-
tion falls, conditions many in-
vestors expect to prevail in
coming months.
One other possible reason
for buying them: skepticism
that the novel responses of
global central bankers to the
global growth shortfall will
prove effective.
“You’re running negative
rates and it hasn’t had the de-
sired consequence,” said Jack
McIntyre, who manages global
bond portfolios for Brandy-
wine Global Investment Man-
agement. “You’re going to
need something more.”table for the U.S.,” said Adam
Posen, president of the Peter-
son Institute for International
Economics. “There’s no reason
for the U.S. to hesitate.”
The politics of debt issu-
ance have grown fraught in re-
cent years, with government
deficits rising after the 2008
financial crisis and again re-
cently. But markets haven’t
been concerned about deficits
recently, with U.S. yields fall-
ing despite a rising budget
gap. Those worried about the
accumulation of government
debt should realize that lock-
ing in low interest rates for
very long terms is ultimately
very prudent, said Mr. Posen.
A few countries have tried.Continued from page B1Ultralong
Bonds
Unpopular
Street. These products trade
on exchanges like stocks but
are cheaper, more transparent
and often more tax-advanta-
geous than mutual funds.
There are now more than
2,200 ETFs listed in the U.S.,
and ETF trading now accounts
for roughly 20% of the daily
volume in U.S. stock markets,
according to Nasdaq.
As money shifted away
from traditional mutual-fund
managers and other invest-
ment firms, ETF providers
emerged as important custom-
ers to custody firms like BNY
Mellon.
During a conference call
last month, BNY Mellon Chief
Executive Charles Scharf said
that ETF assets under custody
at the firm had risen by about
50% in the past year. He alsosaid the bank had recently
won a “significant” slice of
new business.
“We have not historically
been one of the large ETF pro-
viders,” Mr. Scharf said at the
time. “We’re very, very fo-
cused on growing it in a more
material way than what you’ve
even seen in the past. Not a
huge revenue impact in the
short term, but important
strategically for us.”
State Street’s rivalry with
BNY Mellon extends beyond
ETF servicing and into all
sorts of back-office work for
investment firms.
State Street launched the
first ETF roughly 25 years ago
and was the largest player in
the industry for more than a
decade. Since then, however,
the firm has ceded its positionas the top ETF provider to
Vanguard Group and Black-
Rock Inc. Those managers now
control about two-thirds of
the market for ETFs.
BNY Mellon has more than
$35 trillion in assets under
custody or administration, and
employs 49,100 people.
The firm is in the midst of a
multiyear plan to jump-start
tepid revenue growth. BNY
Mellon and other custody
banks have successfully
streamlined their operations
since the financial crisis by
slashing costs.
Separately, BNY Mellon be-
gan another wave of job cuts
this week, people familiar with
the matter said. About 200
employees were affected by
the cuts, part of the continu-
ing push to shed expenses.Bank of New York Mellon
Corp. lost VanEck Associates
as a client of its servicing
business for exchange-traded
funds to rival State Street
Corp., people familiar with the
matter said.
VanEck is consolidating its
custody work, the people said.
Based in New York, the firm
manages more than $49 bil-
lion in assets. It isn’t known
how much of that total will
shift to State Street, which al-
ready serves as a custodian to
some VanEck funds.
The loss puts a dent in BNY
Mellon’s push to become a big-
ger player in the market for
servicing ETFs.
The rise of ETFs has trans-
formed large parts of WallBYJUSTINBAERBNY Mellon Loses Key ETF Client
group. Mortgage rates recently
fell to their lowest levels since
late 2016, mirroring a broader
slide in U.S. Treasury yields.
The move has made it cheaper
for consumers to buy homes
and refinance their homes, rais-
ing hopes for a potential turn-
around in the housing market.
There have also been some
signs that the housing marketmay be perking up after a slug-
gish spring selling season.
Sales of previously owned U.S.
homes rose more than ex-
pected in July, according to
data Wednesday from the Na-
tional Association of Realtors.
The National Association of
Home Builders also reported in
August that confidence among
home builders improvedslightly from the previous
month.
For broker-dealer Strategas,
the signs point to a sustained
rebound. The firm is advising
clients to keep betting on a rise
in home-builder shares, adding
that it would recommend
scooping up shares of D.R.
Horton Inc. following pull-
backs.BYAKANEOTANIHome Builders Reap Benefits of Lower Rates
Fears about declining home sales fueled a long slide among home-builder shares in 2018.MIKE BLAKE/REUTERS.com 1.800.9REGROW
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