Bonds

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.

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.