Bonds

Bond market misses Korea’s youthful monetary tilt

14 Jun 2012

Global exports are slowing, so investors are buying South Korean bonds to bet its central bank will have to cut rates. But young Koreans increasingly want to work in domestic services, not welding Hyundais. With inflation low and joblessness falling, the bank may just sit tight.

Guide for the perplexed: What is a euro bond?

13 Jun 2012

Euro zone politicians will chew over the multiple variations on the theme of debt mutualisation at this month’s summit. Here’s our guide to everything you always wanted to know about Eurobills, redemptions bonds, red/blue bonds, deficit bonds etc but never dared ask.

Euro bonds will be hard for investors to swallow

5 Jun 2012

Investors might be attracted to new-fangled euro bonds. Risks with peripheral sovereign debtors might be diffused and yields could look more generous. It is far from certain, however, that the small-print details will bear close inspection from buysiders.

Liquidity fears trump sense in Asia’s markets

5 Jun 2012

Investors fretting about a euro breakup are moving into the wrong Asian markets. They are favouring liquid Australian and South Korean bonds. But it is hot money that could burn investors if the story changes. Higher-yield bonds from say, the Philippines, might be a better bet.

Market moves point to grown-up asset allocation

1 Jun 2012

Yields on safe bonds are down and equities aren’t suffering too badly. That split makes no sense in a binary world where risk is either off or on. But it may be a sign of investors’ maturity. Asset allocations should reflect a range of investment dangers, and opportunities.

French-German euro bond clash isn’t serious yet

23 May 2012

François Hollande likes them and Angela Merkel doesn’t. But the leaders are unlikely to clash on the need for euro bonds - at least for now. Both know the bonds won’t solve the immediate crisis. And before they can disagree, they must clarify what they’re arguing about.

Germany’s zero-coupon bond redefines ROC

22 May 2012

Forget return on capital. Germany is promising no more than return of capital with a new zero-interest bond. Investors get their money back in two years, with almost nothing more than a warm feeling of security in the meantime. Still, a lot can happen in two years.

Bondholders start dabbling with bad old habits

22 Mar 2012

U.S. companies refinancing debt account for much of the $367 bln of U.S. corporate debt sold this year. Such fundraising is good for Corporate America. But investors are also snapping up more dross. Such a short-term approach to risk and returns may come back to bite - again.

Safe haven tremors signal big investment shift

19 Mar 2012

The first cracks are appearing in the high edifice of safe haven bonds. Sovereign yields are rising, gold weakening and the dollar advancing after a decade of weakness. Global investors should assume that we are on the cusp of change.

Say hello to 100 years of financial repression

14 Mar 2012

The UK might issue ultra-long bonds. The yield would be ultra-low, courtesy of the Bank of England’s monetisation policy. Buyers would be ultra-foolish, but they may come – that’s how financial repression works. This looks like a symbolic victory for the government over savers.

High yield U.S. tourists sail into European storm

15 Feb 2012

The European Central Bank’s cheap money and the siren call of high yields are luring global investors into the European junk bond market. But the region’s slowing economy could suck the wind out of the market’s sails.

Italy’s revival brings little joy to fund managers

7 Feb 2012

Many bond investors have missed the best trade of 2012 so far. Italian 10-year government debt gained 8 pct in January while many managers were wary. Rather than chase prices higher, those who missed the boat may find more value in other corners of the euro zone periphery.

Goldman’s first Islamic foray too clever by half

9 Jan 2012

Sharia scholars have blessed the Wall Street bank’s unusual $2 bln bond. But that approval falls away if the bonds change hands at anything other than par, and that deters potential investors. Given the inevitable scrutiny, Goldman should have been less ambitious.

Rome’s funding pain eases, but is not cured

28 Dec 2011

Italy’s funding costs halved in auctions on Dec. 28, as its bond market started to behave a bit more normally. Cheap ECB funds may have helped, as well as Rome’s new commitment to austerity. But while Italy has taken one step back from the abyss, it still faces huge hurdles.

Bond market will grow at banks’ expense in 2012

22 Dec 2011

Tougher capital rules and funding strains have pushed up the cost of bank credit. That’s giving borrowers an extra push to find other sources of funds. Big companies will increasingly seek to tap the bond market. But small companies and consumers won’t find it so easy to switch.

Corporate bonds push for sovereign status

21 Dec 2011

Finance directors may start giving finance ministers a run for their money. The woeful state of national balance sheets will push risk-averse investors into highly rated companies such as Microsoft. Corporate bonds could prove more attractive than even top quality sovereigns.

Morgan Stanley housecleaning will please Basel

13 Dec 2011

Chief Executive James Gorman’s settlement with bond insurer MBIA puts a big chunk of the financial crisis legacy behind the firm. At $1.8 bln it doesn’t come cheap. But it puts Morgan Stanley on the right track by boosting regulatory capital and tidies up a very messy year.

U.S. bond markets not immune to bank wariness

9 Dec 2011

Bonds give American companies an alternative to bank loans – one that European counterparts often lack. But banks lubricate U.S. bond trading too. Their reluctance to use their oil cans has jammed up the $7.7 trln market. This mini credit-crunch pain may, however, bring gains.

Investors start to notice Germany is in euro zone

23 Nov 2011

Neither an undersubscribed Bund auction nor yields crossing the 2 percent threshold is a sign of total panic. Still, Germany is looking less like a safe haven. That makes sense - it would struggle if the euro came unstuck. All the more reason for EU leaders to stop squabbling.

Santander’s stingy bond swap a sign of the times

23 Nov 2011

The Spanish lender’s plan to exchange junior debt for less attractive senior paper may be unpalatable for bondholders. But holding out isn’t much more attractive. With EU lenders under pressure to boost capital and refinancing rates high, investors had better get used to it.