Bonds

Liquidity risk: a bondholder survival guide

17 Aug 2015

Wall Street executives Jamie Dimon and Gary Cohn blame trickier trading on new rules, an argument ex-Fed boss Paul Volcker refutes. But investors need not panic. They already have tools at their disposal to help combat a sudden drought in the market, and one or two new ones, too.

Green bonds struggle to justify the hype

23 Jul 2015

China’s first eco-friendly bonds push this year’s issuance close to $20 bln. The market has grown fast. But definitions are fuzzy, returns are humdrum, and it’s not clear what problem this solves for corporate issuers, most of whom could sell conventional debt at similar rates.

Puerto Rico woes come with systemic silver lining

8 Jul 2015

Fears that the commonwealth will default on its debt have whacked bond insurers’ shares. Unlike 2008, though, the likes of MBIA and Assured Guaranty now back only a small fraction of the markets they operate in. That should prevent too much pain spreading beyond their walls.

Europe has power to contain Greek bond contagion

16 Jun 2015

Immunity to infection is fading in euro zone debt markets. The gap between German and other yields is widening sharply as Athens and its creditors harden positions. EU authorities can offer boosters to restore the power of their peripheral debt inoculation. They may have to.

Central bankers try tough love on debt markets

12 Jun 2015

Rate-setters are not only tolerating big bond swings. They are actively welcoming the lessons that volatility teaches investors. But there are limits to market discipline. If borrowing costs rise enough to threaten economic recovery, policymakers will probably soften up. 

Chicago bonds catch mild version of Moody’s blues

27 May 2015

Two weeks after the firm cut the city’s credit rating to junk, underwriters priced about $670 mln of bonds with yields approaching 6 pct. That’s nearly double what triple-A cities pay, but well shy of broke Puerto Rico. It’s a fair reflection of Chicago’s simmering fiscal mess.

Euro pessimists are taking the long view

26 May 2015

The single currency is below $1.09 for the first time in nearly a month. Its short-term fortunes may depend as much, if not more, on when U.S. rates will rise as what happens in Greece. But options prices reveal that euro bearishness is becoming more and more entrenched. 

Malaysia’s GDP blueprint has a credibility deficit

22 May 2015

Najib Razak has vowed to make the country rich by 2020. Investors are wary. The opposition chief is in jail, race relations are tense, and a scandal-plagued state investment fund has hurt the prime minister’s authority. A slumping ringgit shows there could be trouble ahead.

Bond turmoil signals new era of return-free risk

15 May 2015

Forget the risk-free rate - investment safe havens are in short supply. Cash can be costly. Gold is a dollar proxy. And recent gyrations in the largest debt markets have undermined the concept of risk-free returns. When this last compass fails, investors are really at sea.

China debt swap lays ground for greater reckoning

13 May 2015

Officials are finalising a plan to replace local authority loans with bonds, which lenders can use to borrow from the central bank. It won’t shrink the 16 trln yuan ($2.6 trln) tower of local government debt, but should stop good loans getting in the way of dealing with the bad.

Sliding markets may just reflect a reality check

12 May 2015

There’s no unexpected bad news to blame for bond price falls and stock declines. Yet by historical standards, high-class sovereign debt is still expensive. Shares aren’t cheap either – and Picassos are at all-time highs. Investors can be forgiven if they’re having a rethink.

Euro zone bond rout breaks whole new set of rules

7 May 2015

Remember when life was simple and easy money pushed up all asset prices? No longer. Government bonds whipsawed on Thursday and stocks are down, while oil prices are up. News isn’t the driver, either. The latest market dramas lack a rationale, but they’re still worrying.

Bond market shock wouldn’t trigger new 2008

21 Apr 2015

Thinning markets have led even Jamie Dimon to fret over what happens if investors are surprised. Bank exposure has fallen, while funds and ETFs have grown. Breakingviews explains why, despite the potential for price gyrations, lower leverage should help avoid another crisis.

Euro zone bond analysts live in brave new world

20 Apr 2015

The old skills are almost useless. Chart patterns tell no tales in uncharted territory. And forget about inflation, growth and nebulous concepts like term premia. Just study politics and ECB buying. It’s an easier life for specialists, but this market is riskier for the economy.

Europe’s credit boom locks in mediocre returns

15 Apr 2015

Investors are throwing money at European companies. Carrefour and Danone paid little over 1 pct a year to borrow for a decade; Novartis got 20-year funds at similar levels. A Breakingviews calculator shows how bond buyers’ generosity could backfire.

Tactical euro zone bond issuance is welcome

15 Apr 2015

Some euro zone governments are issuing a lot more long-dated debt to lock in low rates. The opportunistic supply switch may explain why ECB bond-buying isn’t pushing some peripheral countries’ yields even lower. If so, the extra bit of interest expense is a price worth paying. 

German bonds are becoming like gold dust

14 Apr 2015

They’re scarce, and you increasingly have to pay to own them. The benchmark 10-year Bund may soon go negative. But like gold, it might be a good deal. The market supply is shrinking, thanks to strong German government finances and ECB buying. This paper could prove precious.

China bond market serves up sweet taste of failure

8 Apr 2015

Messing up is good, at least in small doses. A default by a restaurant chain that botched its transition to cloud computing could bring some discipline to a market that had little. The pity is that freedom to fail is a long way from being applied regardless of size and sector.

Actavis sale dresses up barely investment grade

3 Mar 2015

The acquisitive drugmaker attracted huge demand for $21 bln of bonds one notch above junk. They yield 1.75 percentage points over U.S. Treasuries, less than Verizon’s bigger, better-rated issue did in 2013. Buyers of top-tier debt can’t help but keep looking further downward.

Pre-election nerves lurk under UK market calm

25 Feb 2015

It’s hard to tell from UK asset prices that investors abhor uncertainty. Sterling is rising and stocks are hitting record peaks less than three months before a very close election. Healthy economic fundamentals help. Still, there are plenty of jitters in options prices.