Bonds

Natixis gives lesson in bond market fragility

24 Jun 2019

A fund unit owned by the French bank had to write down holdings of exotic bonds and penalise investors who pull money. It’s a prudent move that may stem outflows. But investors will be more nervous in future about funds that dabble in esoteric debt while promising easy liquidity.

China’s bank turmoil locks in moral hazard

21 Jun 2019

Beijing’s takeover of troubled lender Baoshang has revealed surprising bank fragility. Short-term lending rates climbed in reaction, prompting regulators to inject liquidity and walk back threats of a haircut. The episode undermines hopes for ending government guarantees.

Buybacks prolong Wall Street rally nobody loves

20 Jun 2019

U.S. stocks are near record highs – thanks in part to purchases by their issuers. Investors are pulling out of equities and fund managers report extreme bearishness amidst a weakening global economy. Hopes of Fed rate cuts are a fragile support when it’s the only game in town.

China infrastructure bump comes at steeper cost

18 Jun 2019

Beijing is tweaking rules to allow local authorities to step up spending on public projects, which might add 4 percentage points to infrastructure growth this year. Rule changes should let officials borrow more, but they will face a harder time generating returns.

Fed could do worse than mimic Donald Rumsfeld

5 Jun 2019

George W. Bush’s defense secretary famously talked of known knowns, known unknowns, and unknown unknowns. The U.S. central bank, seeking better communication, could borrow the categories. They help explain why markets now expect interest-rate cuts while Fed rate-setters don’t.

Hadas: Shaky assumption underpins debt demand

5 Jun 2019

Investors are rushing into high-grade bonds even though long-term yields are falling. Real returns will be acceptable if disinflation persists. But that’s a big if. More active use of fiscal policy or worsening trade frictions could reverse a trend that’s lasted nearly 40 years.

Beijing needs to pick a bank bailout message

5 Jun 2019

Regulators downplayed their decision to take over troubled Baoshang Bank, just as another small lender with over $100 bln in assets said auditor EY quit. Officials can rescue banks, or not, but history shows they need to be clear about their reasoning when markets are anxious.

Nio forces investors to test-drive new model

30 May 2019

When the $4 bln electric-car maker listed last year, it was branded as China’s Tesla. But the loss-making startup’s strategy has shifted sharply. Nio now plans cheaper models and may build a factory with state backing. Shareholders bought one company, and ended up with another.

Bond market rate cut beats Fed to the punch

29 May 2019

U.S. Treasury yields have fallen over a quarter point in a month, equivalent to a central bank easing. Blame trade worries plus structural factors like weak inflation and negative rates overseas. Fed rate cuts are never a one-off; this market-led one is unlikely to be different.

Snap election will limit Greek policy errors

28 May 2019

Prime Minister Alexis Tsipras has called an early vote. He was likely to lose to the pro-business New Democracy party even if he had held out for a few more months. An early ballot is better for the economy given his Syriza party’s attempts to woo voters with giveaways.

Bond market addition will test China’s resolve

11 Apr 2019

Index inclusion is pulling global investors into the $13 trln market. Implausible ratings and thin liquidity are among fixable teething issues. The real question is if Beijing will meddle with bonds in bad times as it has in stocks. Initial signs are that it might resist.

Aramco frenzy is wrong measure of Saudi renewal

10 Apr 2019

Frantic demand for the oil giant’s $12 bln bond issue might be interpreted as a sign of support for the desert kingdom’s efforts to diversify its economy. Yet securing long-term investment is harder than selling securities. And only some of the buying reflects genuine enthusiasm.

Overpriced Aramco debt still has a Saudi discount

10 Apr 2019

Strong demand for the oil giant’s first bond allowed it to raise $12 billion at lower rates than expected. Borrowing costs are still higher than Western oil peers. But it makes little sense for investors to view the bonds as less risky than Saudi’s tarnished government.

Aramco flashes its cash but also its independence

1 Apr 2019

The Saudi oil giant’s debut bond prospectus shows $111 bln of net income in 2018. Yet Aramco will only pay half the $69 bln needed to acquire Riyadh’s SABIC stake upfront. Potential debt and equity investors will be heartened that there is an implied limit to government meddling.

Vodafone’s financial juggle papers over risks

8 Mar 2019

The telco is funding its 18 bln euro Liberty Global deal with a mixture of debt, derivatives, convertibles and hybrid bonds. It’s a neat way to avoid diluting shareholders when Vodafone’s shares are cheap. But the trick needs rating firms, and markets to play ball.

Deutsche Bank’s opaque asset punt trolls regulator

1 Mar 2019

The lender’s pile of hard-to-value assets grew by 3 bln euros last year, despite the European Central Bank’s plan to scrutinise them more closely. The increase jars with boss Christian Sewing’s vision of a simpler bank – and does little to ease Deutsche’s elevated funding costs.

China makes banks take a practice perp walk

25 Feb 2019

Officials want lenders to use perpetual bonds to boost capital buffers. Generating buyer interest is tough, so Beijing put a thumb on the scales to help sell the first $6 bln issue. State-incubated markets can work in China, but the trick is taking the training wheels off.

Santander gives bondholders a painful lesson

12 Feb 2019

The Spanish lender flouted market convention by not redeeming a subordinated bond at the first opportunity. The move wrong-footed some investors and shows that banks will put shareholders’ interests above creditors. But not all peers can afford to take such a hard-nosed approach.

Bill Gross sends last missive on bonds – and fees

4 Feb 2019

The Pimco co-founder is leaving Janus Henderson, where he managed money in less-than-stellar style since 2014. He’s entitled to retire, but the move follows the end of a decades-long bull run for bonds and underscores the decline of funds which charge too much for their returns.

Xinjiang is an extreme case of China’s growth woes

30 Jan 2019

Beijing is trying to de-radicalise its Uighur minority in giant camps. Officials call them vocational training centres, but mass detentions are not helping investment or jobs. As provinces cut 2019 targets, the region is becoming an acute example of widespread capital retreat.