Bonds

Europe has unconditional bond-buyer at last: Japan

11 Apr 2013

The Bank of Japan’s money printing machine is forcing down risky government bond yields 6,000 miles away. The hope of Japanese money is helping euro zone bond markets shake off a swathe of bad news. European governments shouldn’t take gentle markets for granted.

Exposed bondholders suffer solar burns in China

22 Mar 2013

When solar power was hot in 2008, investors in Suntech bought bonds with no claim on the panel maker’s Chinese business. Now they are likely to emerge from bankruptcy proceedings with pennies. Have lessons been learned? Recent issues by debt-laden property developers suggest not.

Ireland shows powers of virtual ECB

14 Mar 2013

Dublin has sold the first 10-year bonds since its bailout. The move helps it qualify for controversial ECB bond buying - and shows it doesn’t need it. Mario Draghi’s virtual intervention is working wonders. The euro crisis goes on.

Markets wrong to downplay Italian political risk

5 Mar 2013

Italian bond spreads have risen since the election. But it could have been worse - and considering the possible scenarios, it should. The priority is political reform, so a credible government can emerge at the next election. But even this isn’t assured.

Corporate hybrid boom retreads bank capital fiasco

25 Feb 2013

Corporate hybrids, securities that blend debt and equity, are booming. They give companies tax-efficient cheap capital, and investors yield. But the more the market grows, the greater the fallout if issuers, like banks during the last crisis, actually use their equity features.

Soaring kiwi dollar tests faith in inflation goal

22 Feb 2013

New Zealand, which pioneered inflation targeting, faces its biggest test in 23 years. The central bank is under pressure to respond to capital inflows and the overvalued dollar. While it’s right to reject a Swiss-style peg, a single-minded focus on prices is no longer sensible.

Ethical economy: The menace of financial markets

20 Feb 2013

Are free and open markets for stocks, bonds and currencies the glory of the capitalist system? Quite the contrary. Because financial assets have no clear value, these markets are always too influenced by disruptive wild emotions, and encourage destructive greed.

Telecoms debt issue signals Greek renaissance

31 Jan 2013

Greece’s biggest telecoms company has sold 700 million euros of bonds - the first such move since 2011. The cash will help OTE reduce debt and fund investment in new technology. It may also be a tentative sign that business in the Aegean is regaining some semblance of normality.

Colombia faces bigger threats than guerrillas

25 Jan 2013

FARC’s resumption of hostilities after a two-month ceasefire is disappointing. But peace talks continue. Colombia’s solid economic growth, though, is being infected by hot money from abroad distorting the currency and heading to the wrong sectors. That seems the greater worry.

China’s bail-in bonds leave room for conflict

23 Jan 2013

ICBC may become the first Chinese bank to issue debt that can be written down to zero by the regulator in a crisis. Since the state is also the bank’s biggest shareholder, that leaves bondholders exposed. If bad loans swell, outsiders could be forced to foot a chunk of the bill.

Governments on right side of credit cycle for once

17 Jan 2013

Investors are lapping up contingent capital securities in bailed-out banks. Dublin sold on a CoCo from its bank rescue. Belgium’s KBC is issuing the bonds to recapitalise. The boom is helping Ireland and Belgium recoup bailout costs. They should take the money while they can.

India in depth: Crying out for corporate bonds

15 Jan 2013

Using the country’s bank-dominated financial system to fund a $1 trillion infrastructure plan will be risky. Corporate bonds could be a good alternative, and might help cushion the current investment slump. But India’s authorities are stifling the market.

Beware bond-equity rotation and focus on value

11 Jan 2013

Investors have started 2013 feeling bold. Equities are firm, bonds are weak and gold is soft. Is this the long-awaited rotation back to risk? Blindly chasing perceived switches in asset allocation is dangerous. But the value argument is there: shares look cheap relative to bonds.

Welcome to the new world of "high" yield: 2.9 pct

11 Jan 2013

That’s what Germany’s junk-rated Fresenius will pay on its new 7-year bonds. It’s certainly not Drexel Burnham’s idea of high yield. But with benchmark rates and defaults both low, investors are desperate. This sort of pricing won’t look smart when the rate cycle finally turns.

Mongolia gets $1.5 bln licence to play hardball

29 Nov 2012

The nomad state got a good deal on its first government bond, but the effects on its development may be less welcome. The money is more likely to plug budget holes than fund needed infrastructure - and could strengthen Mongolia’s hand in tense dealings with foreign investors.

China’s big-cap bond issuers are in a sweet spot

28 Nov 2012

Issuers like Baidu and China Cosco are finding they can sell bonds in U.S. dollars at attractive rates. Floods of liquidity have pushed down yields, and investors who had underweighted China are regaining interest. Investment banks, meanwhile, are keen to get deals done.

What do bullish investors see in Argentina?

27 Nov 2012

Latin America’s third-largest economy is losing a debt restructuring battle with hedge funds, faces questions about its ability to stay solvent and suffers from mounting domestic discontent. But some investors reckon Argentina’s plentiful energy reserves offer a ray of hope.

Pay bankers in CoCos to manage moral hazard

27 Nov 2012

Bond investors are worried that banks could deliberately run down capital to trigger a bail-in of their contingent convertibles. Checks and balances mean the risk is small. But it’s still real. Banks could address it by aligning bonuses with CoCos.

ECB’s stop-and-go bond-buying plan is clever

26 Nov 2012

The ECB’s purchases under its bond-buying programme would stop every three months during reviews of the target country. Critics fear it may make interventions less effective, or boost volatility. But the concerns are overblown. Regular pauses will keep the pressure on governments.

Investors’ hunger for yield feeds instability

13 Nov 2012

With bond buyers fighting for every basis point, highly rated companies and sovereigns are sensibly extending the duration of their debt. But what’s good for balance sheets looks bad for financial stability. The longer the bond, the bigger the loss when rates eventually rise.