Bonds

Ecuador winning bond market forgiveness too easily

19 May 2014

Low inflation, scant supply and an improving economy may be driving appetite for a planned $700 mln offering. But the country defaulted on $3.2 bln of debt only six years ago. While absolution – or amnesia – may be good for deadbeat regimes, it raises global financial risk. 

Bond bears’ ordeal will only get worse

15 May 2014

There is more pain in store for investors who have bet on falling bond prices. With the ECB likely to ease and the Fed and BoE unexpectedly dovish, higher rates are a way off. The result is an epic search for yield. Resistance looks futile, but surrender will amplify the trend.

ECB abets risky passion for peripheral debt

9 May 2014

A promise of monetary easing is pushing down Italian, Spanish, Irish, and Portuguese bond yields, some to record lows. A harsh form of market discipline forced these countries to accept bitter medicine in crisis times. The regimen may now be too lax to compel them to get fitter. 

China’s offshore bond boom has further to run

25 Apr 2014

Companies like Tencent and CNOOC are looking overseas for financing. Tighter credit on the mainland is a factor. So is international expansion by Chinese groups. Though the yuan’s slide is a reminder of the risks of borrowing offshore, bond issuance should carry on rising.

Stars align for European high-yield debt market

23 Apr 2014

French cable tycoon Patrick Drahi is selling 12 billion euros of junk bonds. The record deal was increased to meet investor demand. With defaults scarce, yields elsewhere low, and sluggish growth curbing policy rates, these are halcyon days for Europe’s high-yield market.

Asian bond sizzle is a bet on deflationary fizzle

11 Apr 2014

Investors have lapped up $50 billion in Asian debt so far this year, roughly the same as in 2013. They’re not ignoring Fed tapering, political tension and the emerging market slowdown. Rather, they are locking mediocre yields and hoping global deflation will prove them right.

Greek bond fever may do economy few favours

10 Apr 2014

Greece’s first bond in four years has met roaring demand. The 3 bln euro deal suggests past bondholder losses and present economic woes are forgiven and forgotten. But the country still has big problems. Excessive investor enthusiasm could reduce the pressure to reform.

Detroit’s bond deal spells relief for muni markets

9 Apr 2014

The bankrupt city has agreed to pay insurers of $388 mln in general obligation debt at least 74 cents on the dollar, far more than the 15 cents proposed before. A judge must still approve the plan, but it should calm investor nerves and boost Motown’s chances of raising funds.

Hugo Dixon: Greek rebound is astonishing

8 Apr 2014

Two years ago, the country looked like it was set for a messy default and exit from the euro. Now it is on the verge of returning to the bond market. There are still political and economic risks. But the financial turnaround of Greece is truly impressive.

U.S. bond yields may ape trailblazing UK shifts

26 Mar 2014

Fixed-income investors are wondering if the Fed will raise rates sooner than expected. They won’t have to think too hard about how to react since a similar situation has already cropped up in Britain. Short-dated bond yields are likely to rise much faster than long-dated ones. 

China’s first bond default will hit in three waves

6 Mar 2014

If Chaori Solar fails to pay interest on March 7, as expected, what then? Investors will be deprived of cash, banks will have to mark down some of their holdings, and new issuers will have to pay more. Though a default is overdue, the aftershocks should not be underestimated.

CoCo pricing looks a little loco

4 Mar 2014

The newish market in contingent capital bonds is growing fast. But when it comes to pricing, it is immature. One example: investors ignore the way credit risk increases with maturity. Time may iron out pricing inefficiencies. The risk is that reality dawns after a sudden shock.

Japan bond investors’ overseas trip may flop again

26 Feb 2014

The Federal Reserve’s taper talk discouraged Japanese investors from venturing abroad last year. Now wobbly emerging markets are threatening this year’s outing. That’s bad news for bondholders searching for better returns - and for the Bank of Japan’s anti-deflation campaign.

Securitisation muzzling does more harm than good

17 Feb 2014

Over-egging the practice of repackaging loans as bonds helped cause the 2008 crisis. Yet supervisors keen to avoid a repeat are loading investors in asset-backed debt with excessive capital charges. Smart firms may find workarounds, but the reforms hamper a key source of credit.

Europe’s big bond traders lose out to Wall Street

28 Jan 2014

Both U.S. and European banks have to comply with new “leverage ratios.” But traditional business models mean firms like Deutsche Bank have to do more deleveraging than American rivals. Already, hard-won portions of the fixed-income pie are disappearing across the Atlantic.

Investors at fault for Arcelor hybrid-bond stink

21 Jan 2014

In buying back one of its hybrid bonds, ArcelorMittal is doing what is financially sensible. Investors, who have taken a big hit, have only themselves to blame for ignoring a risk that was plain to see. It’s a sign the credit yield grab is getting silly. 

Mainstream market outlook could still be right

14 Jan 2014

Contrarians have had a good start to the year. The consensus is that safe bond yields will rise in 2014; they’re falling. Equities are supposed to do well, but look wobbly. Still, a first-quarter setback could improve the chances things will pan out as widely expected by year-end.

Japan’s yen glut is failing to lift global bonds

5 Dec 2013

With the central bank printing money at home, Japanese investors were supposed to be big buyers of global bonds. Instead they have been net sellers this year. While that’s changing, a yen deluge looks unlikely as long as investors remain afraid of the Federal Reserve’s next move.

Chinese “tapering” may worsen U.S. bond woes

27 Nov 2013

Large dependable buyers of Treasuries may be thin on the ground in the coming years. The Fed will trim, and eventually stop, its asset purchases. And now China is talking about halting its reserve accumulation. U.S. bond yields could rise faster and further than expected.

Sovereign CoCos look like good financial innovation

20 Nov 2013

Banks issue loss-absorbing contingent capital, so why not sovereigns? A Bank of England proposal to make government debt extendible in bad times would render crises easier and rarer. The system would be hard to set up today, particularly in Europe, but the idea is worth backing.