Bonds

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.

Bond vigilantes will grab power from central banks

18 Dec 2017

Governments’ net debt issuance in 2018 is set to outstrip central bank buying for the first time in four years. That gives investors a welcome chance to hold profligates to account. Bond markets may, however, be prone to over-reaction as they rediscover their rusty powers of discernment.

HNA may have to check out of some big deals

18 Dec 2017

A bond buyback meant to shore up confidence was quickly offset by a bank alleging “temporary liquidity difficulties”. HNA says this is not the case. Even so, rethinking an attachment to trophy assets such as stakes in Hilton and Deutsche Bank could help calm the market’s nerves.

Bank rules wrong way to fill EU green finance gap

13 Dec 2017

The European Commission wants lenders to help plug the 177 bln euro annual funding shortfall for low-carbon projects. Lower bank capital charges for "green loans" is a mistake, though. Fuzzy definitions will lead to loose lending, and capital ratios will become even more opaque.

Alibaba and the 40-year bond is one tall tale

29 Nov 2017

The e-commerce giant is selling the longest fixed-maturity paper ever by a Chinese company. Jack Ma’s outfit is smart to lock in cheap funding while it can. But with Beijing looking to influence the tech sector, investors should think hard about four decades of political risk.

China’s bond squeeze could spread offshore

24 Nov 2017

Beijing's hard line on risky lending is spilling into the sovereign bond market and knocking shares in financial companies. The stock volatility has limited international significance, but an onshore fixed-income panic could infect China's offshore dollar debt pile.

Gender bonds are more than feel-good investments

17 Nov 2017

Investors have flocked to the first-ever U.S. dollar bond promoting equality at work. They are smart to do so. It's more than good PR at a bad time for the war of the sexes. Given the correlation between moral behaviour and sound returns, the bigger issue is lack of supply.

RCom sets up trial run for Indian bankruptcy rules

14 Nov 2017

Anil Ambani’s struggling telecom operator has missed a payment on a $300 mln U.S. dollar bond. Offshore creditors could claim a default, testing the regime India established last year. A credible, reasonably speedy process would further boost the country’s booming bond market.

Review: “Junk” doesn’t entirely live up to its name

3 Nov 2017

In his highly anticipated new play, Ayad Akhtar draws a direct line to the economic crisis from a loose interpretation of the story of Michael Milken and the rise of the high-yield market. The production is mostly successful – especially for the financially uninitiated.

UK student loan sale has costly Corbyn hedge

31 Oct 2017

Britain is pushing ahead with the sale of 4 bln pounds of loans, despite Labour leader Jeremy Corbyn’s promise to ease student debt. Investors will get compensation from a complex scheme if government policy changes. That further strains the logic of the sale.

Beijing’s dollar bonds seek to reprice China risk

26 Oct 2017

A $2 bln sovereign dollar bond sale is the country’s first since 2004. Despite rating downgrades, the two-part deal is priced aggressively, with slim premiums to U.S. Treasuries. Local banks can guarantee demand, which could artificially cut borrowing costs for Chinese issuers.

Italian high finance picks up tab for bank sins

5 Oct 2017

Sickly mid-sized lender Banca Carige wants bondholders to take a loss as part of a 1 bln euro recapitalisation. Yet it will spare retail investors, leaving more pain for banks and insurers. The country’s flawed banking model is to blame. The good news is taxpayers won’t suffer.