Bonds

Argentina grinds toward economic credibility

22 Jun 2017

Within just a couple of days Latin America’s third-largest economy sold a rare 100-year bond and was then surprisingly snubbed for inclusion in a major stock index by MSCI. Amid all the noise, President Mauricio Macri is slowly asserting the dullness of competence.

China underscores new hard line on outbound M&A

22 Jun 2017

The banking regulator is probing loans made to serial acquirers Anbang, Fosun, HNA and Wanda, reports say. Following the detention of Anbang's chairman, the message is clear: bold foreign M&A is out of bounds. The puzzle is why the authorities let the splurge last for so long.

Century-bond hope defeats Argentine experience

19 Jun 2017

Less than three years after the last of eight defaults in 200 years, Buenos Aires is tempting desperate investors with a yield of nearly 8 pct. Mauricio Macri's reforms have stoked confidence. But the deal says more about short-term fads than the long-term odds of repayment.

Germany’s euro-bond allergy will be hard to cure

13 Jun 2017

France’s pro-European president, Emmanuel Macron, has given new hope to advocates of joint euro zone debt. But expect Teutonic resistance. Europe’s biggest economy is loath to give an implicit bailout guarantee to its own regions so will hardly extend one to other countries.

Lebenthal marks end of two eras on Wall Street

8 Jun 2017

It was 1925 when Alexandra's grandparents opened their municipal-bonds shop. Her father James and TV ads gave it renown in the 1970s. She's now exiting as CEO after a lack of scale impeded efforts to revive the firm post-crisis. Family offices, not brokerages, are the new order.

U.S. stocks and bonds are in economic tug-of-war

7 Jun 2017

Bullish equity investors have pushed the S&P 500 to new highs despite soft data and fading hopes for business friendly policies. With yields tumbling even as a new rate hike looms, fixed income is more attuned to a possible downturn. When the stories converge, it won't be pretty.

Euro zone “safe” bonds would be anything but

31 May 2017

The European Commission has suggested creating low-risk securities by pooling sovereign bonds. The idea is to reduce banks’ exposure to governments. But risks would still be interconnected. Without a common tax base and joint liability, no pan-euro zone debt can be truly secure.

Goldman steps in avoidable $2.8 bln Venezuela mess

30 May 2017

Money managers at the firm bought oil giant PDVSA’s debt at a big discount, indirectly handing the central bank needed dollars. Investments aren’t necessarily moral choices, but can hit reputations. After trouble in Greece and Malaysia, Goldman ought to have a better nose for it.

ChemChina creates new strain of LBO funding

26 May 2017

The chemicals giant is refinancing the debt backing its $44 bln purchase of Switzerland’s Syngenta. This involves less equity than a typical leveraged buyout, and $18 bln of perpetual bonds sold to three Chinese entities. This is M&A finance cross-bred with government policy.

Indian banks pile up risks with shock absorbers

25 May 2017

Lenders have pumped out more than $7 bln of contingent bonds that are written down if capital falls short. But implicit state support means investors are ill-prepared for losses. As some banks edge close to missing coupons, it is easy to imagine a system-wide freakout.

Euro zone bonds are taboo worth breaking

17 May 2017

Spain wants the bloc’s 19 governments to pool their debt. That idea is likely to be shunned by Germany. Yet mutualisation is happening anyway through bailouts and central bank largesse, and countries are less profligate than they were. Common bonds needn’t mean wayward spending.

German bonds are caught between Mario and Macron

12 May 2017

Euro zone yields have risen in anticipation of tighter policy from ECB President Mario Draghi. But the euro zone’s fragility puts a cap on long-term rates. Changing that would require the kind of common fiscal policy imagined by new French President Emmanuel Macron.

Malaysia throws cheque book at 1MDB problem

27 Apr 2017

A deal with Abu Dhabi puts Malaysia on the hook for $3.5 bln of the disgraced fund's debt and leaves a dispute over a further $3.5 bln unresolved. That is a costly attempt to patch up relations between the states and avoid potential embarrassment before an election.

China’s offshore bond revival could be brief

24 Mar 2017

Companies are rushing to sell dollar bonds overseas, aided by a new ability to issue onshore guarantees. Yield-hungry foreign investors are keen. But as liquidity tightens and rates rise, expect more defaults. Those pledges could prove unreliable if things go wrong.

Co-op bail-in would set bank creditors on edge

23 Mar 2017

The Co-operative Bank needs capital again, and markets are fretting over the risk of a resolution. Given Co-op’s ongoing losses, the Bank of England could justify one. The risk is investors think that even banks with respectable capital ratios aren’t safe from regulators.

China-Hong Kong “bond connect” has dual benefits

20 Mar 2017

Beijing is firming up plans to let mainland and Hong Kong investors trade in each other's debt markets. The tie-up will make it easier to get Chinese bonds into world indexes. It should also boost trading and push up prices in the territory's fixed income market.

Markets’ latest distortion: riskless company debt

7 Mar 2017

Some 200 billion euros of corporate bonds are trading below interbank swap rates – usually seen as a floor for credit risk. That renders one measure of companies’ creditworthiness redundant. This distortion comes courtesy of central bank meddling and German parsimony.

ECB asset purchase rules are self-inflicted wounds

28 Feb 2017

The central bank’s bond-buying scheme has mechanistic rules that are driving German bond yields to record lows well below zero. This makes losses likely. While past gains may offset such hits, loosening the rigid constraints would reduce the risk of losses and market disruption.

Rate tweak whiplashes UK insurers

27 Feb 2017

Insurance companies will have to pay more for injury claims after the government said payouts must be discounted at a negative rate. The metric was too high before, and arguably still is. The real mystery, though, is why financial risk ends up with claimants, not insurers.

China shows U.S. banks self-serving generosity

7 Feb 2017

JPMorgan and Citi have won coveted licences in China's onshore bond market. China's real goal might be to get inclusion in global bond indexes, which would bring stable foreign investment. But restrictions on capital flows make such bonds less appetizing than they could be.