Bonds

Bond vigilantes give Illinois whispered warning

16 Jun 2016

The U.S. state, which hasn’t even set a budget, sold $550 mln of bonds on Thursday at a slightly higher yield premium than it paid in January. It’s not enough of a financial penalty to force reforms, but it’s a hint of the danger that bickering politicians are courting.

Markets can force rethink of ECB German bond bias

16 Jun 2016

Teutonic yields are sinking. Brexit risks amplify the impact of ECB chief Mario Draghi’s bond buying. Very low borrowing rates are great for governments but heighten the danger of market volatility. Changing rules that force central bank purchases to favour German debt can help.

Brexit is reopening euro zone sovereign wounds

14 Jun 2016

France’s bond yields are rising while Germany’s are falling. It’s a warning markets may doubt the integrity of the euro zone if a UK exit triggers copycat referendums. The ECB has neither the power nor the mandate to fight the kind of extreme outcomes that could ensue.

Hong Kong could be a black belt in green bonds

14 Jun 2016

China is pushing environmental finance, but rules and definitions are fuzzy. Hong Kong’s large pool of capital and transparent regulation give it the credentials to whip this immature market into shape. With just one green bond under its belt, however, the city has work to do.

Sterling not done as pre-Brexit whipping boy

7 Jun 2016

An EU exit would be less disastrous for Britain’s stocks and bonds than its currency. Some firms will gain from weaker sterling, and rate cut speculation may support gilts. But foreigners holding these assets are going to hedge FX exposure, piling yet more pressure on the pound.

China index: Bond boom drives rebound

5 May 2016

Breakingviews’ Tea Leaf index leapt to a 20-month high in March as stimulus kicked in. Exports and property investment grew at the fastest rate in over a year. Increased pollution points to busier factories. But by far the strongest factor was record issuance of corporate bonds.

When Mario Draghi buys, it’s time to sell

21 Apr 2016

The European Central Bank president’s promise to buy bonds has caused corporate funding costs to fall. It is also causing distortions in derivative markets. That may be a sign the programme is helping companies and investors, but history suggests the easy money has been made.

Breakdown: Why are Chinese bond defaults surging?

21 Apr 2016

More state companies are failing to pay bondholders. This is partly necessity amid an economic slowdown, and partly a useful dose of market discipline. But the withdrawal of government support could spook investors, creating a credit drought.

Saudi U.S. selloff threat not to be trifled with

20 Apr 2016

The kingdom has told lawmakers it would dump some $750 bln of assets should Congress pass a bill allowing 9/11 victims to sue. These funds are its last line of defense to lower oil prices. That the alternative - having assets frozen - is an even worse outcome is scarier still. 

Bondholder hunt for pixie dust heads to Argentina

19 Apr 2016

Buyers hungry for yield and novelty had a feeding frenzy over the $16.5 bln of debt sold in the country’s first global offer since a 2001 default. It’s a big win for President Macri, whose reforms added to the deal’s appeal. But such giddiness may miss the challenges he faces.

Time for banks to go cold turkey on sovereign fix

18 Apr 2016

Europe is considering tightening rules that make it easy for lenders to own government debt. Banks addicted to sovereign punts would suffer, and governments lose wiggle room. Yet reform could hasten euro area integration, while ECB bond-buying makes it a less scary prospect.

Euro zone bond bonanza: waste not, want not

12 Apr 2016

The average yield on German debt has hit zero and France is locking in low borrowing costs for decades. How governments use such cheap funding matters. Berlin’s migrant spending may reap more benefits than French handouts to students. Public investment would be even better.

Breakdown: Green finance grows despite fuzzy logic

11 Apr 2016

Policymakers are desperate to coax cash into planet-friendly projects to cover the costs of environmental crises and climate change. The latest idea is to label green investments. But the precise benefits are often unclear. Breakingviews offers a guide through the undergrowth.

Bank CoCos deserve all the brickbats

18 Mar 2016

Deutsche Bank’s John Cryan thinks new hybrid bank bonds are flawed. Market turmoil is forcing regulators to clarify when baffled investors get coupons. Yet unless there is also standardisation of when they convert from debt to equity, CoCos will always be prone to death spirals.

Negative yielding bond world favours the agile

1 Mar 2016

German 10-year bond yields are in sight of last year’s record low, 0.05 percent. There’s no reason why they can’t fall lower than this given Japan just auctioned comparable debt at a sub-zero yield. Investors need to be nimble to make money in this world of negatives.

Deutsche bondholders send tepid vote of confidence

23 Feb 2016

The bank had to buy back less than half the 3 bln euros of debt on offer, making a tidy profit as most investors stood pat. That may allay fears of a market panic, but wide credit spreads suggest the lender is still considered risky. Its return to health is a work in progress.

Banks’ hybrid hissy fit is no disaster

18 Feb 2016

Fears that Deutsche Bank may stop coupons on hybrid debt took the bank to crisis. That will be seen as proof that hybrids are no match for real equity. Yet the mess was caused by vague regulators and lazy investors. Without these obstacles, hybrids can still play a role.

Deutsche makes investors offer they should refuse

12 Feb 2016

The German bank is offering to buy back 5 billion euros of bonds. A big take-up means more capital for Deutsche, but could also imply a lack of confidence in the bank’s solvency. Given the potential for bond prices to snap back, it may be better for investors to sit it out.

German CDS imply bank doom loop is unbroken

10 Feb 2016

Market turbulence has led investors to snap up safe German bonds, yet the cost of insuring against a Teutonic default is up. Blame a rout in Deutsche Bank shares. Until Europe’s banking union is complete, governments are the ultimate backstop if big lenders get into trouble.

Deutsche hybrids: from poster boy to problem child

9 Feb 2016

The German lender has moved to reassure investors fretting about delayed coupons on its new AT1 securities, after CDS prices collapsed. Unlike hybrid forebears in 2008, AT1s should absorb losses. Yet instead of dampening volatility, the fear of a trigger is exacerbating it.