Bonds

Asia’s bond boom is both cyclical and structural

12 Nov 2012

Bond issuance has surged to a record in Asia this year. Investors’ hunger for yield explains much of the rise. But as banks retreat and equity markets slump, companies are also looking for new sources of financing. Even if the market is overheated, the long-term trend is up.

Barclays’ CoCo bond needs generous pricing

8 Nov 2012

The UK bank is issuing a new type of “contingent capital” - a bond that inflicts total wipe-out when capital ratios come under severe but not disastrous pressure. The security is effectively subordinate to equity. Doubtless it has its place. But the mooted 7 pct yield seems too low.

New PIK-toggle surge doesn’t mean the end is nigh

7 Nov 2012

Investors should be wary of bonds that can pay IOUs in lieu of interest. But a rash of issuance to fund dividends to private equity firms doesn’t yet look like a 2007-2008 rerun. The recent deals have protections built in that should help keep reckless behavior in check.

Buyers too soft on first Bolivian bond in 90 years

24 Oct 2012

The Andean nation’s $500 mln bond carries a 5 pct yield. That’s half what investors charge richer Venezuela on similar debt. They may be putting too much faith in Evo Morales. They’d better hope Bolivia’s president respects debt obligations more than private property.

Moody’s-S&P spats offer fix to ratings conflicts

22 Oct 2012

Moody’s has publicly trashed its rival’s work on a mortgage bond, the second such squabble in two weeks. Companies may now fear getting punished for cherry picking the most favorable rater. But that’s the best antidote yet to the ratings business’s inherent conflicts of interest.

"Crisis over" signals are deceptive

12 Oct 2012

For the first time since 2009, banks in the euro zone can issue bonds more cheaply than companies. Lower borrowing costs should spur lending and prevent messy deleveraging. But it’s all driven by central bank largesse. And for many financial issuers, markets remain hostile.

Hugo Chavez gets chance to do more economic damage

8 Oct 2012

Before Sunday’s election, some of Venezuela’s creditors thought the ailing strongman would lose. His easy win gives him six more years to take over industries like mining and food and squeeze the oil sector further. Bondholders can expect the Chavez discount to return.

Navy vessel caught in hedge fund Argie-bargie

4 Oct 2012

Elliott Capital has seized an Argentine tall ship. It’s the latest twist in a decade-long legal saga to pry a better deal from the country on its defaulted bonds. Argentina screams extortion and wants U.N. support. But Elliott’s move is a win of sorts for creditor rights.

ECB bazooka eases peripheral bond doom loop

13 Sep 2012

Investors are snapping up peripheral corporate debt after the ECB’s pledge to stamp out euro breakup fears - even Telefonica’s. That lightens pressure on issuers’ banks and, in turn, their sovereigns. But the interplay between issuer and sovereign isn’t yet a virtuous circle.

Stop worrying and learn to love corporate bonds

10 Sep 2012

What’s a bond investor to do when safe government yields range from negligible up to low? For now, the solution appears to be buying corporate debt. That means being exposed to a slowing economy, and could end badly if central banks withdraw their largesse. But the good times probably won’t end soon.

Hugo Dixon: Spain and Italy mustn’t blow ECB plan

10 Sep 2012

Mario Draghi’s bond-buying scheme has bought Madrid and Rome time to stabilise their finances. But if they drag their heels, the market will sniff them out. It will then be almost impossible to come up with another scheme to rescue them - and the single currency.

Spanish mortgage bottom-fishing only for the brave

3 Sep 2012

Investors hope for juicy yields buying beaten-up covered bonds secured on Spanish mortgages. Losses would need to reach apocalyptic levels for investors to suffer. But no one can really tell what would happen in a covered bond default.

Put Dylan’s tangled bond in the credit watchtower

31 Aug 2012

Goldman Sachs is said to be working on a tiered bond secured on Bob Dylan royalties. Investors’ blood may run for the freewheelin’ early tracks. Modern times material may be attractive too. But the street rocking 1980s stuff could leave junior creditors blowing in the wind.

New optimism may torpedo Asia’s safe-haven bonds

16 Aug 2012

Investors driven by weak global growth, low interest rates and strong Asian finances have sought shelter in the region’s bonds. But Asia’s growth hasn’t fallen as fast as feared. If the U.S. or China move to revive growth, those bonds could prove vulnerable to a brightening mood.

European Central Bank faces bond-buying Catch-22

14 Aug 2012

If the ECB wants its bond-buying programme to work, it must reassure investors that it wouldn’t rank above them in a restructuring. But solving that problem could raise another one - accumulated losses for the ECB would amount to massive transfers within the euro zone.

Goldman shows not all innovation in finance is bad

2 Aug 2012

A $9.6 mln loan to the Big Apple is a canny use of pocket change. The bond will yield a tidy profit only if criminal recidivism in the city declines. It may be PR, but Goldman has a chance to prove not all Wall Street concoctions are weapons of financial mass destruction.

Securitizing rent has more problems than promise

26 Jul 2012

Crafting bonds backed by rent is being touted as a way to fund mass purchases of foreclosed U.S. homes. But big obstacles - sparse data, management challenges and new risks for investors - complicate matters. It could be years before such bonds are sold. And they won’t be cheap.

Islamic bonds offer cheaper funding for lucky few

17 Jul 2012

Sharia-compliant bonds, once a pricey source of funds, are now cheaper than their conventional equivalents. A growing pool of captive Islamic capital is driving down yields and spurring interest far beyond the Middle East. But not everyone can take advantage.

Ireland may just be able to return to bond market

4 Jul 2012

Last week’s euro summit dangled a big carrot: that Dublin’s punishing bank bailout which brought the country to its knees may be rejigged. Irish bond yields are now as low as Spain’s. But much detail needs to be agreed, leaving scope for disappointment.

Euro sovereign bond plan may just work

29 Jun 2012

The details are still vague. But if funds are used to provide cash directly to governments rather than buy bonds in the secondary market, there may be enough money to bail out Italy and Spain. But if the countries aren’t held to tough reform, it could be a bridge to default.