Bonds

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.

Central banks have no choice but to keep the faith

20 Jul 2017

ECB chief Mario Draghi and Bank of Japan boss Haruhiko Kuroda have spent trillions of euros and yen without generating much inflation. Nor is it clear when a pick-up in growth will feed through into prices. Yet they are obliged to insist their policies will work eventually.

Greek bonds are a bet on euro zone support

18 Jul 2017

Athens wants to issue bonds just after receiving another bailout tranche. If Greece had to finance itself at market rates it would struggle to stay solvent. But debt relief from European governments and ECB bond-buying will reduce the risk. Investors may find the wager appealing. Full view will be published shortly.

Bond market breathes life into erstwhile zombies

17 Jul 2017

European investors are refinancing companies like Dutch retailer Hema that not long ago were trading at distressed levels. Such credits are enticing when central banks have squashed yields, and Europe’s economy is recovering. Markets are unlikely to remain so forgiving for long.

Bank of England puts price on bond fund stupidity

12 Jul 2017

Regulators worry that the growth of open-ended bond funds could cause fire sales. A central bank paper estimates that could add nearly half a percentage point to companies’ funding costs. Pointy-headed analysis should reinforce the case for more sensible investment models.

Cool credit markets could be own undoing

10 Jul 2017

Corporate bonds shrugged off the recent “taper tantrum” that hit government debt and equities. Investors may be betting that central banks will only slowly tighten policy, supporting demand for riskier assets. Yet unruffled markets may only hasten policymakers’ rush for the exit.

India’s bond market deserves a good whipping

7 Jul 2017

The securities regulator is cracking down on the fast-growing corporate bond market. With a large chunk of new issues coming from firms in dubious financial health with too generous ratings, it is a good time to force companies and rating agencies alike to raise their standards.

Next stop for Chinese bonds is credible ratings

3 Jul 2017

A new Bond Connect lets foreign fund managers buy into the mainland’s $9 trln market from Hong Kong. The easier access is welcome and should speed up China’s inclusion in key indexes. But big inflows, especially into corporate bonds, will require more plausible credit ratings.

Green bonds could help build new Silk Road

30 Jun 2017

Investors have yet to warm to the Belt and Road, China’s huge infrastructure plan. Beijing’s new development bank, the AIIB, could help by issuing green bonds to fund railways and ports. But if the projects’ environmental credentials are weak, the lender’s reputation will suffer.

Draghi’s taper tizzy is sign of dangers to come

29 Jun 2017

Comments by ECB chief Mario Draghi drove up bond yields and the euro, despite later protestations that markets had misread him. The ado owes more to investor complacency than fuzzy talk. It highlights traders’ twitchiness and the challenges in withdrawing ultra-loose policy.

Draghi’s hints have more clout than Yellen’s deeds

28 Jun 2017

ECB chief Mario Draghi had more market impact by alluding to higher rates than Fed Chair Janet Yellen did by hiking them two weeks ago. That fits a recent pattern: central bankers who have yet to tighten policy are more apt to upset expectations – and that’s what moves prices.

Hong Kong’s test-bed role is valuable and fragile

28 Jun 2017

Beijing has gifted the city with schemes linking investors to mainland currency, stock and bond markets. The tightly controlled pilots offer unique access to China. But they could either be swept away by deeper overhauls, or hobbled if the central government retreats on reform.