Bonds

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.

Carney guessing game feeds bond market distortion

13 Sep 2016

The Bank of England has revealed corporate bonds eligible for its 10 billion pound buying spree. Its requirement that companies make a material contribution to the country still throws up some anomalies. Second-guessing the central bank makes capital markets less efficient.

Rakuten jig highlights Japan’s warped benchmark

7 Sep 2016

Shares of the shopping website leapt on news it would join the Nikkei 225. It shows the power of an arbitrary index weighted by share price instead of fundamentals like size or free float. The Bank of Japan's $60 bln-a-year push into index funds will only amplify the distortion.

China is wrong venue for an SDR revival

1 Sep 2016

Beijing wants to revive interest in Special Drawing Rights, the IMF quasi-currency it is about to join. The World Bank will sell $2 bln of SDR debt in China to help. Global investors badly need an alternative to the dollar but China's rickety bond market is a poor place to start.

China opens door further to yield tourists

22 Aug 2016

China's $7.5 trln bond market is already fairly open to foreigners. But a looming "bond connect" would bring in extra buyers who don't want to set up shop on the mainland. Relatively juicy yields will be a big lure. The downsides are corporate opacity and limited volatility.

Hammond and Carney play discordant UK bond duet

9 Aug 2016

British finance minister Philip Hammond will have to sell more gilts as the economy slows. The Bank of England is buying. But markets are increasingly tuning out rate-setters’ interventions. Extra supply could mean central bank boss Mark Carney has to raise the volume.

SoftBank takes maverick option on financing

4 Aug 2016

Selling $10 bln of hybrid bonds would build on SoftBank's cachet with retail investors. It could also help keep headline debt levels in check after the $32 bln bid for ARM. But this is hard to square with boss Masayoshi Son's belief that he knows better than rating agencies.

Carlyle’s dentist bond is full of cavities

25 Jul 2016

The private equity firm's bond for a British dentist chain sets new precedent in loose debt covenants. The UK vote to leave the EU has not tamed investors' animal spirits. With central banks promising ever looser policy, it's easy for issuers to extract generous terms.

China’s bondholders won’t go down without a fight

25 Jul 2016

Investors are confronting the Chinese province of Liaoning over the latest default by Dongbei, a troubled steelmaker. With defaults by state-backed firms escalating, expect more bitter rows like this – especially if debt holders can successfully take on Liaoning in court.

Slovenian twist puts Italy on straight and narrow

19 Jul 2016

Europe’s top court said Ljubljana was right to hit creditors when recapitalising banks. That’s unhelpful for Italian premier Matteo Renzi, who has banks to rescue but doesn’t want to punish their bondholders. He may have to play it straight, which would be no bad thing.