Bonds

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.

China’s own "Little Greeces" should help themselves

18 Nov 2011

Shanghai became the first local government to sell bonds this week. Provinces like Hainan, which has debts of almost 100 percent of GDP, cannot easily go down that route. Beijing might not come to the rescue, so they need help themselves with austerity and asset sales.

Equity-bond decoupling shows risks have changed

17 Nov 2011

Investors may be rethinking the inherent riskiness of equities, especially compared to sovereign bonds. That is a logical response to seismic shifts in the european debt markets. Shares aren’t invincible but they are pretty well equipped for these rough times.

Markets start to reflect euro zone’s darkest fears

16 Nov 2011

Government bond yields across the single currency are showing signs of severe strain. Only Germany is viewed as a reliable safe haven. An Italian default and euro zone breakup may still be unlikely. But investors are now clearly factoring such a scenario into their calculations.

BNP debt sale bad news for euro zone governments

3 Nov 2011

The French lender has slashed its exposure to Greek, Spanish and Italian debt at a cost of 3 bln euros. Though BNP can afford to take the hit, smaller rivals are less robust. Banks’ aversion to sovereign bonds is also bad news for governments that need to finance their deficits.

U.S. government has chance to borrow very long

30 Sep 2011

Thanks to the Fed’s maneuvers, Uncle Sam could sell bonds maturing decades from now at uncommonly low yields. Moreover, pension funds need the paper. The Treasury has kicked around the idea of 50 or 100-year bonds before. Maybe it’s time to actually issue some.

Tyco sets new example for conglomerate bondholders

19 Sep 2011

When the industrial group last broke into three in 2007, an ugly fight with creditors ensued. This time, Tyco’s paying them more heed. It plans to spread $4 bln of debt evenly rather than dump it into one unit. Lenders to other breakup candidates may want to gird themselves.

Euro bonds are not the answer

19 Sep 2011

The euro countries aren’t going to agree to guarantee each others’ debts in time to solve the current crisis. And, once it’s over, neither euro bonds nor fiscal integration is desirable. Market discipline is a better way run monetary union in the long run.