Bonds

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.

Bond investors toss a coin on Saudi reforms

28 Sep 2017

The kingdom’s $12.5 bln bond was oversubscribed. Rising oil prices and low debt help explain the appeal. But the 30-year notes remain a bet that Crown Prince Mohammed bin Salman can wean Saudi Arabia off oil. Investors’ zeal is a benchmark of the demand for emerging market debt.

What Carney can learn from Yellen

21 Sep 2017

Fed Chair Janet Yellen showed rate-setters can shock markets even when they stick to the script. That’s a lesson for the Bank of England’s Mark Carney, who has talked up a rate rise this year. Like her, he may have to hike without having solved a host of economic puzzles.

Bondholders can play hardball with Portugal’s Novo

18 Aug 2017

Bailed-out lender Novo Banco wants creditors to take a haircut, to smooth a sale to Lone Star. But creditors have numbers to block the swap, and could recapitalise the bank themselves. Novo has a history of scrapping with bondholders. This time creditors may have the upper hand.

Etihad’s airlines fail, but odd CDO remains aloft

17 Aug 2017

Air Berlin and Alitalia are insolvent. Their debt is probably worthless, except for an unusual collateralised debt obligation that part-owner Etihad used to fund them. It is trading at a price that suggests Etihad might bail it out. Fuzzy guarantees often end badly.

ECB weakens Italy doom loop by bending bond rules

16 Aug 2017

The European Central Bank is buying more Italian bonds than its rules allow. That helps lower the country’s borrowing costs and allows its banks to cut exposure to their sovereign. With elections and political risks looming, it may have to take an ever more pragmatic approach.

Wall Street’s resolve overcomes even Pyongyang

9 Aug 2017

U.S. investors shrugged off possible Armageddon just as easily as protectionism and D.C. dysfunction. President Trump’s blunt nuclear warning might have been a fresh reason to rush into gold or gunsmiths. Mr. Market, however, rarely foretells geopolitical or economic threats.

Need and yield make cat bonds roar

8 Aug 2017

Low rates and a hunger for uncorrelated returns are fueling demand for bonds insuring against catastrophes, like the World Bank's new deal for Mexico. Yields on these instruments have fallen even as issuance has soared. Disaster, if it strikes, may only increase their popularity.

Iraq bond market return no cakewalk for investors

4 Aug 2017

Buyers piled into the war-torn country’s $1 bln bond issue, its first in a decade. Iraq faces many dangers but has the support of the U.S. government and oil reserves. Besides, with emerging market debt squeezed by low rates, fund managers have little choice but to take a risk.

EU play for primary dealers may speed their demise

26 Jul 2017

Banks that buy EU debt directly from governments might have to move jobs out of London after Brexit to retain the privilege, Reuters reports. Such strong-arm tactics may drive some out of a business that has already grown less appealing and force a rethink of how bonds are sold.