Bonds

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.

U.S. corporate borrowing slump is a bearish signal

25 Jan 2019

American companies are issuing much less debt in 2019, even after a 20 pct slump in 2018. One reason is higher earnings after lower taxes, but another is cuts in planned investments. That’s how a trade war and political dysfunction could put the economy on a slower growth track.

The Exchange: Flint Mayor Karen Weaver

18 Jan 2019

Before its tainted-water scandal hit in 2014, the Michigan city was already infamous for high crime and poverty rates after a prolonged economic slump. Weaver discusses the fallout from the water crisis – and explains how the birthplace of General Motors is undergoing a revival.

Bond markets shrug off Danske dirty-money risks

11 Jan 2019

The bank at the centre of a money-laundering scandal saw its cost of issuing risky debt more than double. Still, its yields are far below those of Italy’s UniCredit. The troubles at the Danish lender may have further to run, and are harder to predict, than Rome’s political drama.

Masters of detail will rule in jumpy markets

10 Jan 2019

Big swings in both directions in equities and bonds make it dangerous for investors to jump out of one and into the other. Better to drill down and find groups with healthy balance sheets and decent free cash flow. Those chasing high growth or cheap valuations could come unstuck.

Saudi’s sunny debt offer belies gathering clouds

10 Jan 2019

Riyadh’s successful $7.5 bln bond sale suggests investors have moved on from the Khashoggi murder. Yet long-dated Saudi debt trades at an implied discount to its rating. With the kingdom too optimistic about oil prices and facing peak demand, markets won’t always be so friendly.

Credit Suisse Mozambique mess is shameful at best

4 Jan 2019

Three of the Swiss lender’s former bankers have been arrested on charges of facilitating kickbacks on $2 bln of loans for the African country. Credit Suisse blames deceptive employees and says it has tightened controls. Even if the fallout ends there, it’s highly embarrassing.

Buyout lenders will enter a new world of pain

4 Jan 2019

Rising bond yields and volatile markets mean the leveraged finance boom is over. The lenders which financed it have taken more risk than ever, and given away the ability to control struggling companies. When deals do go bad, they will get back much less than they are used to.

Three key indicators to watch like a hawk in 2019

2 Jan 2019

Want to know whether there’s going to be a U.S. recession, a trade-war flare-up, or corporate implosions? You could obsess over news and social media – or skim a few proxy indicators like the price of soybeans, the Treasury yield curve, and the number of stocks in bear territory.

Welcome the new AI investment overlords

27 Dec 2018

Man vs. machine will replace active vs. passive as the dominant battle in the $80 trln money-management war. Pressure to cut costs keeps mounting while artificial intelligence gets better at systematic trading, crunching data and identifying trends. Logic favors the computers.

European banks stuck in bond market prison

13 Dec 2018

Lenders may need to raise over 500 bln euros of loss-absorbing capital when investors are fretting over weak growth, rising rates, and geopolitical tensions. Borrowing costs are rising, and even strong banks are scrapping deals. To avert a crunch, the ECB may have to step in.

U.S. bond yields turn from green light to red

4 Dec 2018

Treasury yields plunged to a three-month low on Tuesday and flashed a potential recession signal. While easy rates have supported the economy and stock market during the recovery, the latest moves suggest troubling weakness. They also raise the risk of a Fed policy mistake.