Bonds

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.

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.