Bonds

Argentine opportunity cost is reason to cut deal

28 Jul 2014

Another default arguably might not make things immediately worse. But it would set back recent efforts to curry favor with international financiers. With maybe $300 bln needed to develop shale oil and gas alone, swallowing national pride and ponying up $15 bln look worth it.

China default shows market forces exist for some

22 Jul 2014

A second bond looks set to fail, and funding costs for riskier issuers have been rising. Yet big and state-linked borrowers still enjoy low rates, because investors believe failure is only for the unlucky few. The real shift will come when China challenges that tenet.

Markets sleepwalking into European slowdown

15 Jul 2014

Portuguese worries have taken Europe’s shares off their highs. But investors haven’t fully registered a deceleration in the region’s big economies – including Germany. The softening may partly reflect the crisis in Ukraine. Either way, policymakers have no easy remedy.  

"Seller beware" when profiting from market calm

10 Jul 2014

Volatility, gauged by indicators like VIX, is ultra-low. While it could be the calm before a storm, investors including Pimco have been selling insurance against price swings. It’s one way to make money amidst shrinking yields, but it’s also a risky bet against the unexpected.

Euro periphery bonds’ era of easy gains is over

23 Jun 2014

The market sometimes sends little signals that investors are losing faith. The spread between the bid and offer price on southern European government debt has widened since May. That suggests an increase in caution, and less confidence that yields will keep falling. 

Europe’s new market finance zeal slides over risks

5 Jun 2014

With banks not keen to lend, European officials want markets to provide more credit. The ECB may even try to help by buying asset-backed securities. The goal is worthy, but caution is warranted. Markets come with their own risks, most notably vanishing liquidity in a crisis. 

Central banks abet the complacency they fret about

4 Jun 2014

Monetary policymakers worry that today’s torpid markets carry the seeds of tomorrow’s torrid moves. They’re right to worry, but the problem is of their own making. Cheap money is making investors complacent, so they underestimate the risk of big adverse price swings. 

Low volatility and high doubt hamstring markets

29 May 2014

Trading volumes are dipping in several asset classes. Low price volatility and tougher regulation can be blamed. So can investors’ bruised confidence, after some big bets went awry this year. It’s safer to sit still than to move in what might prove to be the wrong direction. 

Spanish boards: a country for old men

23 May 2014

Company directors in Spain are older, and boards are larger and less diverse than the European average. The biggest groups have been run by the same bosses for over a decade. Change isn´t likely to come from within. It’s up to investors to demand a governance shakeup. 

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.