Bonds

Low bond yields wreck age-old investment credos

19 Nov 2019

Allocating 60% to equities and 40% to fixed income used to count as a balanced choice. Yet depressed debt yields mean such portfolios offer a dwindling buffer against setbacks in stocks. Investors who turn to hard-to-trade assets to diversify risks will only face other problems.

Spanish instability numbs markets into complacency

11 Nov 2019

Bonds and stocks barely budged after Prime Minister Pedro Sanchez failed to win a majority in national polls. Forming a government will likely mean striking a deal with far-left and pro-Catalan parties. With growth slowing and high debt levels, it’s hard to square investor calm.

UK gilts’ odd stability is precarious

6 Nov 2019

Britain’s main political parties are in a bidding war to woo voters before an election. Yet UK debt yields are steady. Hopes of more Bank of England easing is one reason. Bond vigilantes will wake up if a smooth Brexit opens the way for rate rises and government spending surges.

China’s eco-friendly debt can be a shade greener

16 Oct 2019

Beijing's rules for its pioneering $40 bln green bond market are still too pliable: a refiner last week issued a note to pay for a petrochemical complex. A central bank review now underway offers a chance to boost credibility by pushing guidelines closer to international norms.

Leveraged loan partygoers take a much-needed rest

1 Oct 2019

Growth in risky corporate debt has slowed. Investors worrying about the economy are driving a harder bargain with private equity-owned groups like Shutterfly and Sotheby’s. Yet sovereign bond yields are ultra-low and buyout firms have huge cash piles. The lull may be temporary.

Viewsroom: WeWork overhaul won’t be enough

26 Sep 2019

Adam Neumann lost his CEO role and control of the shared-office provider after its valuation plummeted in preparation for a now-postponed IPO. But WeWork’s business model remains a problem. Plus: Thomas Cook’s collapse hits China’s Fosun. And: parsing financial climate pledges.

Aston Martin gets license to kill or cure itself

25 Sep 2019

The eye-popping 12% interest rate on the luxury automaker’s new $150 mln bond highlights creditor concerns about demand, cash burn and Brexit. But if targets for a new SUV are not met quickly and the company again runs short of cash, investors may find the yield is not enough.

Nigeria is right to fight $9 bln arbitration claim

25 Sep 2019

The African nation is refusing to honour a ruling by UK-based judges on a failed gas project. Abuja is on thin ice because it failed to appeal on time. But the contract awarded to a little-known Irish firm looks suspect. Reopening the case would be a victory for common sense.

Beijing enables corporate debt dysfunction

20 Sep 2019

A provincial government funding vehicle has declined to redeem its perpetual bonds for the first time. State-backed companies embraced equity-like hybrid debt in part to hit their deleveraging targets. With $75 bln of it effectively coming due, the shortcut could prove costly.

Climate-linked debt’s influence starts to spread

11 Sep 2019

Italian utility Enel’s new bond has a coupon that rises if it misses green-energy goals. Unlike previous sustainability bonds, it can use the cash for anything. That should widen the market for such debt. Investors can magnify the impact by demanding tougher penalties.

Junking Ford threatens shares more than bonds

10 Sep 2019

Moody’s has downgraded the carmaker’s debt rating, citing weakening cash flow and earnings. But that’s old news already priced into the $36 bln company’s bonds. While CEO Jim Hackett has some tough years ahead, bankruptcy risk is remote. The dividend, though, is much less secure.

Trailblazing German bond sale has hidden message

21 Aug 2019

The government of Europe’s biggest economy managed to sell 30-year debt at a negative yield for the first time. Expectations of imminent monetary easing created some demand. However, details of the auction reveal a shortage of investors buying into the fixed-income mania.

Green bond purists overlook benefits of grey

19 Aug 2019

Companies that pollute can sell debt with an eco-friendly tag if they ringfence the money for climate-conscious projects. Critics call this “greenwashing”. But the extra transparency asked of borrowers is useful. So is an injection of ethical thinking into corporate treasuries.

Germany would kill a few birds with one green bond

15 Aug 2019

Raising ring-fenced money to manage a shift away from fossil fuels would underscore Berlin’s focus on making the transition. It would also give eco-friendly finance a boost. And ideally, the government would exclude spending on a greener future from its balanced budget goal.

Ebola bonds are wonky way to tackle pandemics

13 Aug 2019

The World Bank-backed instruments are meant to use private capital to fight disease in poor countries. But their rather random structures create weird incentives for both issuer and buyer. As a way to tackle outbreaks, it’s not obvious they’re better than more direct charity.

Brexit pulls Ireland out of ECB force field

30 Jul 2019

Yields on Irish bonds have been rising even as they fall across the euro zone. Fear of a chaotic UK exit from the EU outweighs hope of European Central Bank easing. Dublin lacks its own currency or control of monetary policy. Public spending will have to cushion any shocks.

Bill Ackman finds activist attention unappealing

18 Jul 2019

The hedge fund boss’s $4 bln London-listed fund has incurred investor wrath over its low price and a bond issue. The prescription is activism 101: buy back stock and shake up the board. Ackman, for once a target, may find new sympathy for the defence that he just needs more time.

Abu Dhabi’s private equity plunge is sensible idea

15 Jul 2019

Hiking direct investments to the asset class by the emirate’s $700 bln sovereign wealth fund - and cutting reliance on fee-hungry buyout firms - raises risks when the economic cycle turns. But ADIA’s status as one of the more measured SWF dealmakers affords a degree of comfort.

Hadas: Bond markets lost in inflation-growth gap

10 Jul 2019

Changing growth expectations explain most daily movements in bond prices, while falling inflation parallels the long-term trend of declining yields. Every so often, however, market gyrations reflect hopes that growth and inflation will reconnect. There’s little sign of that.

Bond markets keep raising bar for central bankers

4 Jul 2019

Global yields are falling with benchmark German ones at record lows. Investors expect more monetary policy easing on both sides of the Atlantic. That will come but the scale and speed of market moves mean rate-setters will have to work hard to meet ever-rising expectations.