Bonds

Trillion-dollar U.S. deficits are funding headwind

10 Apr 2018

Recent tax cuts will push the annual federal budget shortfall into 13 figures and debt to nearly 100 pct of GDP by 2028, Congress’s number-crunchers reckon. The forecast, on the eve of a big auction of Treasury securities, gives investors one more reason to demand higher yields.

Legal woes could impair SocGen’s 2020 vision

29 Mar 2018

The French lender says it is close to settling with U.S. regulators over investigations relating to Libya and Libor. A sanctions-busting probe could pose a sterner test, though. Any fine above 1.8 bln euros could threaten SocGen’s capital target – and put pressure on dividends.

Ego is Italy’s main barrier to radical government

26 Mar 2018

The rightist League sided with the 5-Star Movement to elect parliament’s speakers. It’s a sign the two forces, which want to unpick reforms and spend more, can collaborate. A coalition of mavericks would strain euro zone relations. But agreeing on a prime minister will be tough.

China bond-index debut a timely counter to tariffs

23 Mar 2018

Bloomberg will include the country’s government and policy-bank debt in a key global index. That should attract foreign investors and encourage more liberalization. It’s also a reminder amid rising trade tensions that flows of money far outweigh those of goods and services.

Volatility now has a life of its own

15 Mar 2018

Measures of how much asset prices are expected to gyrate have risen from ultralow levels. But investment strategies that worked a decade ago may not now. Volatility can now lead, not just follow asset prices and old market relationships may break down when turmoil hits.

Debt straitjacket will confine Italy’s next leader

2 Mar 2018

Candidates in Sunday’s election promise to spend more. But the winner won’t have much wiggle room. If Italy’s primary budget surplus dips below 1 pct of GDP, cutting overall debt will be hard, a Breakingviews calculator shows. Rising interest rates are a further constraint.

Cox: How to rid your portfolio of assault weapons

1 Mar 2018

Since Breakingviews first highlighted the role of BlackRock, Vanguard and other fund managers in financing manufacturers of AR-15 rifles after the Parkland school shooting, readers have asked how they can be sure they're not complicit. Here's a handy tear sheet to guide them.

Indonesia lays bare green-bond growing pains

27 Feb 2018

The country's $1.25 billion fundraising is hard to square with its palm-oil and coal exports. Issuers with the least eco-conscious credentials, though, are also important to lure onto the bandwagon with financial incentives. It's the various shades of green that are awkward.

Why bank investors give a FICC about volatility

16 Feb 2018

Global fixed income trading revenue declined 11 pct last year, Coalition data shows. It’s a big reason investment banks again failed to cover their cost of capital. Market ructions will reveal whether a cyclical upturn is near – or whether banks need to accept structural decline.

Volatility good and bad for Europe’s bank chiefs

7 Feb 2018

For the past two years Deutsche Bank’s John Cryan, Credit Suisse’s Tidjane Thiam and Barclays’ Jes Staley have been able to blame poor performance on becalmed markets. Higher volatility undermines that excuse. Trading revenues must grow or they risk shareholder revolt.

U.S. stock plunge is a welcome reality check

5 Feb 2018

Indexes fell over 4 pct on Monday and share-price volatility surged to a seven-year high. Companies remain very profitable and higher bond yields should be no surprise. But a breather – at a minimum – was overdue after a record run. It’s also a reminder of shifting fundamentals.

Bond market tightening complicates Powell’s task

31 Jan 2018

U.S. Treasury yields rose to near four-year highs even as the Fed left policy unchanged at Janet Yellen’s last meeting. A fresh growth spurt and worsening deficit outlook pose challenges for successor Jerome Powell. Hiking in a rising-rate environment is riskier for the economy.

Chinese web giant Tencent gets U.S. tax bonus

15 Jan 2018

U.S. investors snapped up more than half of a $5 billion bond sale by Tencent. That's partly thanks to Republican tax cuts, which may result in fewer bonds from American tech stalwarts. That helps the gaming and social media outfit to lock in cheap overseas funding.

Debt markets will call time on equity rally

4 Jan 2018

U.S. stocks are rallying in tandem with bond yields. In the past 30 years, that has never happened for more than four consecutive quarters. If the pattern holds, one or the other will slide within six months. It’s more likely to be equities.

Italy will go back to its old ways in 2018

2 Jan 2018

The country’s flawed electoral law will produce a hung parliament in national polls. Reformist forces will be weaker while former Prime Minister Silvio Berlusconi will gain traction. A return to the frail coalitions of the past makes it harder to cut public debt and red tape.

U.S. junk bonds are time bomb with a long fuse

29 Dec 2017

Low default rates, a lack of alternatives and foreign demand will support high-yield bonds in 2018. Yet with spreads near record lows, covenants weak and leverage rising, the seeds of a bear market are plentiful. Investors should keep a wary eye for the first shoots of trouble.

Credit markets will enjoy one last hurrah

26 Dec 2017

Healthy global growth will make chief executives and buyout firms more willing to take risks and keep a lid on defaults. There’s also a case for locking in cheap borrowing costs before central banks become less generous. But the next wave of blowups is building.

Capital glut will overwhelm rising disaster losses

21 Dec 2017

Hurricanes and wildfires doubled estimated catastrophe-related insurance claims to $136 bln in 2017. Reinsurers and cat-bond holders have had a bad year. A hotter planet suggests more pain. But a surfeit of investors chasing uncorrelated returns will keep the cash flooding in.

Dealmakers find a fickle friend in hybrid bonds

21 Dec 2017

Companies are increasingly funding deals with hybrid bonds. Rating agencies' willingness to treat the debt as equity flatters their credit scores. And with interest rates low, investors are hungry for funky, higher-yielding securities. It’s a fertile but unstable combination.

Chinese government debt will go global

21 Dec 2017

A major index will include Chinese government bonds in 2018, dragging foreign money into a $9 trillion market. Beijing will appreciate the foreign stamp of approval. But sovereign guarantees will give scant cover against volatility spreading outwards from corporate credit.