Bonds

Motown shifts recovery up a gear

4 Dec 2018

Detroit is selling its first bonds since taking back full financial control from the state. The city that went bankrupt in 2013 now has balanced budgets, higher tax revenue and a surplus. But issues like blight and a crumbling school system present tricky speed-bumps to negotiate.

Italian budget climbdown would be just a start

26 Nov 2018

The anti-austerity government may trim its 2019 budget deficit target to defuse a clash with the European Commission. That would ease financial market tensions which risked undermining any benefits of extra spending. The stimulus is still being spent in the wrong places, though.

GE may be canary in credit market’s coal mine

15 Nov 2018

The firm’s bonds tanked this week even as an asset sale briefly lifted its shares. That’s a warning shot for all credit investors. U.S. companies carry more debt than ever, and quality has deteriorated. Rising interest rates and slowing growth could make this a big problem.

Beijing’s stock rescuers can’t leave market alone

25 Oct 2018

Officials are raising over $14 bln to stave off a market selloff. Unlike the “national team” intervention during the 2015 crash, anxious local governments are getting involved early. The issue is similar: once again officials have let China’s debt problem infect equities.

Bond investors add fuel for Uber’s profit bonfire

18 Oct 2018

The ride-hailing company has tapped the junk market for $2 bln, even though it generates no EBITDA from which to pay interest. Investors are betting either that Uber will turn a profit – or more likely, that its dash for growth will lure future investors who can pay them back.

Hadas: Beware of the curse of financial markets

17 Oct 2018

In theory, movements in bond and stock prices have big economic effects. In practice, the ties are fairly tenuous. But the widespread belief that these minor and inaccurate indicators are valuable is enough to give them power. A bad week in the markets can do real economic harm.

Green bonds are fertile spot for climate activists

8 Oct 2018

Buyers of debt earmarked for environment-friendly uses are tougher on borrowers than, say, those lending to typical private-equity deals. And up to $60 trln of such funding is needed by 2030. That may give green creditors a stronger platform than shareholders to push for change.

M&A bankers better off hunting pheasant than elk

3 Oct 2018

The value of deals above $10 bln popped by 150 pct in the first nine months of the year. Some, like Comcast’s purchase of Sky, come with chunky financing fees. Still, the glory is spread less thinly on smaller deals, which are also growing quickly, and are easier to close.

Foreign exodus to test Italy’s bond market buffers

31 Aug 2018

Fear of bold public spending is spooking foreign investors, making it harder for the government to fund itself. Italy can lean on banks and local savings to plug the gap. But gorging on debt hurts lenders and growth. And “Quitaly” concerns may lead Italians to move cash abroad.

Italy’s Trump card shows bond market fragility

24 Aug 2018

The U.S. President offered to buy Italian debt, according to one newspaper. Donald Trump may want to help a eurosceptic government but has limited scope to mitigate the damage that Rome’s policies are inflicting on domestic asset prices. Help is better sought closer to home.

Italy’s bond fix idea resembles covert bailout

21 Aug 2018

The economic spokesman of the ruling League Party says the euro will collapse unless the European Central Bank limits the gap between euro zone countries’ bond yields to 150 basis points. That bar is too low and would give big spenders free rein to dodge hard budget decisions.

Turkey misses easy chance to win credibility

24 Jul 2018

The lira slumped after the central bank left interest rates unchanged. With inflation at 14-year highs, there was every reason to tighten policy. Inaction will only reinforce investors’ concern that President Tayyip Erdogan’s distaste for higher rates is exerting undue influence.

EU finally does right thing on taxing bank capital

4 Jul 2018

Under pressure from the European Commission, the Dutch government removed a benefit for banks that issue hybrid bonds. Other countries will follow. Tax breaks helped lenders rebuild capital after the crisis. The sector’s relative health means it no longer needs special treatment.

Bank CoCos get a new reason to go pop

2 Jul 2018

Exchange-traded funds are pooling bonds that convert into equity in a crisis. It’s an odd mix: ETFs allow investors to buy or sell assets easily, while contingent convertibles can be hard to trade. The union may mean more investors for funky debt, but also bigger price moves.

Bond markets start to call Saudi bluff on Bahrain

26 Jun 2018

The tiny Gulf kingdom’s bond yields are spiking. Bahrain’s borrowing and dependence on a high oil price make its debt hard to sustain. But Saudi Arabia has no interest in its neighbour devaluing or falling apart. The more markets push, the more likely Riyadh is to step in.

ECB staggered retreat from QE makes sense

14 Jun 2018

Europe’s central bank said it would stop adding to its bond portfolio, but hinted rates would stay low. The move averts fears quantitative easing will help Italy’s spendthrift government. But trade wars and a weak euro zone mean it has little choice but to keep its options open.

Argentina’s $50 bln IMF deal has a year to work

8 Jun 2018

President Macri, like Cardinal Mazarin’s preferred generals, has been lucky as well as bold so far in his efforts to fix Latin America’s No. 3 economy. With elections not due until late 2019 and the deal shielding social spending, he has time to beat opponents’ IMF-phobia - just.

China’s bond market faces buyer crisis

5 Jun 2018

A crackdown on off-balance sheet wheezes is likely to sap banks' appetite for bonds. They are by far the biggest buyers, so their retreat will hurt prices. Yield-hungry entrants might appreciate higher returns, but the coming liquidity drain could destabilise a rickety market.

EU sovereign debt fix fails Italian test

24 May 2018

The European Commission wants to make it easier for investors to buy bonds that pool euro zone government debt. It’s part of a plan to reduce banks' exposure to indebted states. Recent Italian worries show such securities might help, but also why they are unlikely to work.

Italy premier’s to-do list would tax a veteran

24 May 2018

Newcomer Giuseppe Conte has vowed to defend the country’s interests in all quarters. If confirmed by parliament, he will face EU conflict on an upcoming budget, the future of Alitalia and Monte dei Paschi, and new asylum laws. All would be tough even if he wasn’t a total novice.