Bonds

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.

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.