Bonds

Europe’s “whatever it takes” becomes “what next?”

2 Feb 2017

Bond yields are rising as the end of money-printing looms. The return of a crisis like the one that prompted ECB President Mario Draghi's pledge to save the euro zone is unlikely. Yet as investors focus on political risk and debt, governments will face tougher choices.

Guest view: Fixing finance to repair U.S. roads

19 Jan 2017

Plenty of federal programs exist to help leverage private funds eager to invest in infrastructure and make President-elect Donald Trump's $1 trln plan work, argues lobbyist James Courtovich. What's missing is cooperation in Washington to hold municipal bond issuers accountable.

Kuwait’s strength could be a weakness

17 Jan 2017

The oil-rich sheikhdom is planning its first dollar debt sale. It should be a hit: Kuwait has a good fiscal record and vast foreign assets. Yet other Gulf states are weaker, raising the risk of devaluations or euro zone-style bailouts. The strongest may end up bearing the burden.

Banks whiplashed by Asia’s distrust of hot money

9 Jan 2017

Indonesia plans new rules to ensure research is "factual", after a downgrade led it to cut ties with JPMorgan. Malaysia is clamping down on currency trading. The moves only highlight Southeast Asia’s vulnerability to capital flight rather than the region's impressive growth.

Shadow banking and Chinese bonds are dangerous mix

4 Jan 2017

China's bond sell-off was aggravated by a scandal at a securities firm. That's made regulators worried about the role non-bank financial institutions are playing in fixed-income markets. Untangling links between shadow banking leverage and bonds could cause economic shocks.

Cheap CoCos keep Chinese banks dancing

20 Dec 2016

Smaller Chinese banks need to raise billions of dollars in loss-absorbing bonds. Having to raise regulatory capital is supposed to curb risky behaviour. But state support means mainland banks pay far less than European peers. That gives them little incentive to sober up.

U.S. Fed catches Chinese bonds off-guard

16 Dec 2016

Yields are soaring on the prospect of a rapid rise in U.S. interest rates. Beijing needs to defend the currency, and prevent new bubbles, so its options are limited. Authorities have to restore calm while avoiding the ham-fisted tactics that failed during the stock market crash.

China bond market could use some foreign insight

9 Dec 2016

Regulators may allow foreign ratings agencies into the onshore market. That might comfort overseas investors enough to persuade index compilers to include Chinese bonds. The trick will be stimulating competition in a market twisted by government guarantees.

French bond rot has capacity to spread

7 Dec 2016

Gallic bonds are trailing euro zone peers. This suggests investors are worrying that the far-right's Marine Le Pen might do better in the 2017 presidential elections than polls show. Were her chances to improve materially, market damage would quickly spread across the region.

UK bonds offer scant recompense for messy politics

4 Nov 2016

Investors are keeping faith with Theresa May's government. Though sovereign yields have climbed in the past month, the shift is largely down to rising inflation expectations and fading hopes for lower interest rates. The relaxed stance leaves few buffers against political shocks.

Higher global bond yields have solid foundations

28 Oct 2016

The recent rise in benchmark yields is not as dramatic as last year’s surge - but far more significant. Last year market quirks played a big role. This time the drivers are expectations for higher inflation and stronger growth. These are harder for investors to brush off.

Bonds’ impersonation of stocks upends investing

24 Oct 2016

Debt investors are increasingly reliant on capital gains in a world of disappearing yields. This shift will force a rethink of old rules on how much money is ideally allocated to so-called safer fixed-income assets. Stocks and investments such as infrastructure stand to benefit.

Saudi bonds put Riyadh first and investors last

18 Oct 2016

The world's largest crude oil exporter is selling $15 bln of bonds. Demand will be strong even though Saudi is offering few insights into oil policy, regional strategy or the fiscal outlook. If the kingdom struggles to wean itself off oil, investors can expect bruising treatment.

BoE’s credit bazooka is misfiring – again

13 Oct 2016

Bank of England Governor Mark Carney’s corporate bond-buying programme is failing to lower company borrowing costs. As in 2009, the bank can be accused of not being aggressive enough. Then again, Prime Minister Theresa May’s lukewarm support doesn’t help.

Buying Chinese bonds still bad idea, just less bad

30 Sep 2016

Foreign investors are accelerating plans to increase their holdings of Chinese bonds, a poll shows. The prospect of global index inclusion is likely to push up prices, and yields are attractive. But the fundamentals are still scrambled. This is no place to park the pension.

Bold issuers test limits of yield-hungry market

29 Sep 2016

Bond investors, who only recently snapped up negative-yielding Sanofi and Henkel debt, shunned an aggressively-priced Lufthansa offering. IPOs too are showing signs that buyer power is returning and that desperation for yield hasn’t dulled asset managers' ability to scent risk.

Government bonds signal confusion, not cheer

19 Sep 2016

Yields on long-term sovereign debt have perked up across the developed world. Normally that's a sign of optimism. Yet borrowing costs remain ultra-low. The upward drift most likely reflects uncertainty about central bank policy and worries about the effects of negative rates.

Deutsche’s hybrid beast is partly tamed

19 Sep 2016

Fears of a $14 bln settlement have hit the German bank's Tier 1 bonds. Yet reassuringly, the effect on other banks is less than when Deutsche spooked the market back in February. The sting is that regulators may therefore be happier to inflict losses on bondholders in future.

Scarce bonds and bank pain limit BOJ’s next move

19 Sep 2016

The Bank of Japan faces a conundrum in its battle to revive inflation. It can’t keep buying $800 bln of bonds a year for much longer, but negative rates are deeply unpopular. This week’s big policy review might require the BOJ to make other concessions to the financial industry.

Global bond rout gives Draghi a reprieve

14 Sep 2016

The rise in yields as prices fall makes more German debt eligible for ECB purchases, under its own arcane rules. President Mario Draghi is still, though, running out of bonds to buy. Canny market timing is a poor substitute for a real solution: Germany could simply borrow more.