Bonds

Securitisation’s recovery is no sure thing

12 Aug 2009

The Fed is considering extending the Talf programme that has helped resuscitate the market for new assetbacked deals. But US plans to force issuers to keep skin in the game and banks to keep many assets on their balance sheets could restrict securitisation s usefulness.

Bank of England keeps worrying – and printing

6 Aug 2009

The UK central bank surprised, and unsettled sterling, by adding £50bn to its existing £125bn quantitative easing programme. The BoE is right to be worried about the economic prospects. Unfortunately, it s not clear still more moneyprinting will bring about a recovery.

Resecuritisations highlight capital rule loophole

5 Aug 2009

Brisk business reworking troubled mortgage bonds is driven in part by financial firms desire to minimise capital charges. But the underlying assets and potential losses stay the same they just get shifted around. It's another case of regulators relying too much on ratings.

GE Capital doesn’t deserve special treatment

28 Jul 2009

The conglomerate s finance arm says it s critical to the US economy, better than a bank, has adequate loanloss reserves and doesn t need more capital. Yet it s fighting plans to further regulate its $650bn balance sheet because it's too big to fail. Something doesn t compute.

BoE faces QE dilemma

23 Jul 2009

One member of the monetary policy committee has been criticised for suggesting the programme of printing new money may be put on hold. That won t help the government sell gilts but that s hardly the BoE s job. As for QE itself, it doesn t seem to be working.

Could CIT and Lehman have saved each other?

16 Jul 2009

Uncle Sam won t send the $76bn lender a lifeboat, dooming it to the same bankrupt fate as the Wall Street firm. Ironically, if Lehman had consummated talks to buy CIT back in 2002, the resulting pig s breakfast might have been considered too big to fail.

Rating firms may have to eat their own cooking

15 Jul 2009

Calpers is suing the big three over $1bn of losses on tripleA rated SIVs. The big US pension plan says they re to blame since they helped structure the deals before rating them. That argument just might breach the raters' legal defences and unleash a flood of litigation.

US opens second front on credit derivatives

14 Jul 2009

The Justice Department is asking banks that own data provider Markit for information as it investigates possible CDS market abuse. Its legal options aren't clearcut, but its ability to embarrass could threaten the lightly regulated environment favoured by derivatives dealers.

CIT’s life-and-death struggle could drag on

14 Jul 2009

The corporate lender needs liquidity desperately. Asset sales are problematic and CIT s tripleC rating precludes accessing debt markets without a government guarantee. Yet the firm has the means to soldier on for several more months in hope of a rescue.

Bank rhetoric partly to blame for attempts to ban CDS

13 Jul 2009

Calls to outlaw them most recently by US lawmaker Maxine Waters appear unlikely to succeed. But they re affecting the larger debate over CDS regulation. If banks had been more forthcoming earlier about default swaps true nature, they might not be in such a bind now.

Sorry CIT, you’re not too big to fail

13 Jul 2009

The $76bn US business lender finances everything from donuts franchises to daycare centres. Its faulty funding model has forced it to seek government loan guarantees which don t seem forthcoming. The lesson: only the biggest of reckless lenders get helping hands.

California’s promises might trade at a discount

1 Jul 2009

The Golden State is short on cash so it plans to issue IOUs instead. The last time it did so, most banks accepted the scrip at face value. This time, in light of the state budget woes and economic crisis, banks may demand a discount hurting anyone paid with these promises.

Fed leaves punchbowl but signals last call nears

24 Jun 2009

The US central bank left its target rate unchanged. But it signalled that the economy may be nearing a bottom. Its comments hint that it may change its bias toward tightening sooner rather than later. If it wants to avoid a damaging runup in commodities, it can t wait too long.

B&B’s CDS holders edging back from the brink

22 Jun 2009

The deferral of coupons on Bradford & Bingley s subordinated debt briefly saw traders take risky punts on whether its credit default swaps might pay out. But now it looks like the staterun UK bank s CDS will pay after all. If so, the CDS market will breathe a sigh of relief.

Buy China policy is worrying

17 Jun 2009

Plans to favour homegrown goods in China s $586bn stimulus won t do much to return Chinese industrial firms to rude health. Such rhetoric is more likely to merely fan protectionist flames elsewhere. Countries with bloated export sectors shouldn t throw stones.

Sainsbury’s fundraising shows canny opportunism

17 Jun 2009

The UK retailer is placing shares and convertible bonds to raise £450m. The move capitalises on the market recovery and warm sentiment towards boss Justin King. But Sainsbury s predatory expansion plans also indicate that its risk profile may have turned up a notch.

US plan for securitisation risk misses the point

16 Jun 2009

The market could benefit from some changes. But forcing lenders to keep 5% of what they securitise is a red herring. Subprime lenders, as well as plenty of banks that have failed, did have skin in the game. But that didn t keep them from taking outsized risks.

Bond spat is chance for Dubai to prove maturity

16 Jun 2009

The row between investment bank Shuaa Capital and statebacked Dubai Banking Group over whether the former's $400m fundraising was a mandatory convertible seems farcical. A fair and speedy resolution to the spat could give Dubai s standing as a financial centre a needed boost.

GM default swaps highlight debt recovery divide

15 Jun 2009

Senior lenders, unlike unfortunate counterparts at Chrysler, are rightly being made whole. CDS on their debt will pay next to nothing. Subordinated lenders, by contrast, are set to take a drubbing. So they ll collect under CDS contracts. That reflects the risks each group took.

Dollar diversification fears overblown – for now

11 Jun 2009

Worries that foreign buyers would snub the US Treasury s 30year bond auction after Russia, China and Brazil said they wanted to reduce dependence on the dollar proved misguided. Central banks flocked to buy the bonds. Treasury may be relieved, but it shouldn t relax.