Bonds

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.

Italy’s next economy minister is the one to watch

22 May 2018

Radical parties have proposed little-known academic Giuseppe Conte to head their government. Yet the economic portfolio matters more for the indebted country’s future. The new minister’s attitude towards the euro will go a long way towards determining investors’ faith in Italy.

Vanguard puts bond fund managers on notice

21 May 2018

The giant fund firm wants to launch the first U.S. exchange-traded product for global fixed-income. Rising rates pose risks to those who buy it, but the $54 trln bond market is largely untapped by cheap index trackers. Active securities pickers will have one less place to hide.

Settling 1MDB scores will be easier than debts

18 May 2018

Malaysia’s new government can reopen investigations in the state fund but they are stuck with its debt. Reckless promises of support, and a previous desperate clean-up, put the state on the hook for about $8 bln. Trying to dodge these obligations would do more harm than good.

UniCredit may be stuck with costly crisis capital

10 May 2018

The Italian bank should not be able to treat the proceeds of a 2009 hybrid issue as equity, a hedge fund argues. CEO Jean Pierre Mustier might prefer to get rid of the expensive instruments. But it’s hard to extract UniCredit from the transaction without upsetting investors.

Computers come for debt capital markets jobs

1 May 2018

Citi, JPMorgan and Bank of America will later this year roll out an online platform that will streamline the way in which companies issue bonds and help investors to compare credits. A successful launch could over time help these banks to shrink their sales and syndicate teams.

Steinhoff payout may test South Africa reform zeal

27 Apr 2018

Hedge funds piled into 1.6 bln euros of the failed retailer’s bonds betting that its healthy South African unit will honour them. The fallout from Steinhoff’s collapse may make a payout politically tricky, and challenge new President Cyril Ramaphosa’s market-friendly credentials.

WeWork junk-bond investors enable a contradiction

26 Apr 2018

The trendy shared-office outfit is the latest firm with heady prospects and huge cash burn to tap credit markets. Like Uber, Tesla and Netflix, WeWork needs funds for expansion to justify its valuation. Yet the healthy cash flow creditors prefer may only come with slower growth.

U.S. bond yields may be throwing investors a curve

23 Apr 2018

The difference between short- and long-term Treasury rates is the smallest since before the financial crisis, raising fears of a coming recession. Yet the yield curve is a flawed warning, sometimes flashing years before a downturn hits. There are far better things to worry about.

Zambia debt dispute undermines African credit

17 Apr 2018

The copper producer has denied it has dollar debt beyond its $8.7 bln of foreign borrowing. Its vague clarification comes two years after a $3 bln bond scandal in neighbouring Mozambique. Bilateral lending, particularly from China, is blurring the credit picture across Africa.