Bonds

A flawed but useful economic model for a bleak age

14 Apr 2023

Ideas become fashionable when they meet the needs of the era. John Cochrane’s fiscal theory, which states that governments ultimately determine the level of inflation, fits the bill. Despite its shortcomings, the model may be helpful, says Edward Chancellor.

Swedish real estate is canary in the coal mine

13 Apr 2023

The Nordic nation is at the sharp end of Europe’s real estate slowdown. Residential prices fell 15% last year, with offices and shops set to follow as debt costs surge. Its property firms with borrowings equivalent to 40% of GDP have little cushion if foreign bondholders panic.

Bank health barometer could use own health warning

28 Mar 2023

Stock market investors interpreted last week’s jump in Deutsche Bank’s credit default swaps as a sign of distress. Yet thin trading in parts of the $12 trln market for speculating on creditworthiness can exaggerate moves. Add social media and it can feed self-fulfilling spirals.

Swiss CoCo litigation may have a broader payoff

23 Mar 2023

Holders of Credit Suisse’s $17 bln contingent convertible bonds think authorities were wrong to wipe them out. A legal challenge will take years. Still, Bern might decide to placate angry investors. And a fight will discourage countries considering following the Swiss example.

Credit Suisse rescue sends shockwaves far and wide

23 Mar 2023

The ailing Swiss lender was saved by UBS with a $3 bln takeover. In this Viewsroom podcast, Breakingviews columnists debate why the deal pushes up bank funding costs, how the new mega-lender affects Switzerland’s financial system, and why bank deposits are becoming less reliable.

Switzerland takes CoCos to point of non-viability

20 Mar 2023

Holders of Credit Suisse’s $17 bln of contingent capital will lose the lot despite UBS paying $3 bln for its rival’s shares. The bonds boomed after the last crisis, but uncertain conditions make them riskier than bank equity. If investors flee, they’ll be less useful for banks.

India socialises some very easy ESG wins

15 Mar 2023

SBI’s recent $1 bln social loan, following a similar deal by HDFC, made the pair the world’s top issuers of such credit. They bolster the case for breaking up the responsible investing initialism. India’s next trick is appealing to a growing pool of fussier capital.

Big bank selloff rests on tiny kernel of truth

10 Mar 2023

Shares in JPMorgan, HSBC and others dropped after Silicon Valley Bank raised equity to cover losses on bond sales. That’s not going to happen to large players with more reliable funding. But it’s a reminder that rising interest rates bring risks as well as rewards for lenders.

India bond market backstop is nice window-dressing

1 Mar 2023

The Adani mess may have jolted New Delhi to accelerate a $4 bln fund to help avert runs on corporate debt-holding mutual funds. The size could grow but it ignores the broader illiquidity problem. Fixing that means upgrading market infrastructure and letting more foreign money in.

Bank of Japan has learnt danger of half-measures

18 Jan 2023

The central bank’s decision to stay put on interest rates saw the yen soften and hurt 10-year bond yields. Last month’s surprise tweak to bond trading bands failed to impress traders. Inaction may be painful and expensive, but muddled economic signals make it understandable.

European stocks will defy bonds’ revival

16 Jan 2023

In the past decade, Western equities delivered far better returns than bonds. An ongoing central bank crusade to fight inflation points to a fixed income comeback in 2023. Yet cheap valuations and ECB rates hesitancy will help European stocks steal a march on local bonds.

Guest view: Debt fixes can help rebuild Ukraine

11 Jan 2023

Even as Russia’s invasion ravages the country, policymakers need to start planning for reconstruction, write William Rhodes and Stuart Mackintosh. States and private creditors will chip in. U.S.-backed Brady bonds, which helped ease past crises, can provide further relief.

ECB will have to stay laggard in bond-buying exit

13 Dec 2022

The central bank will explain how it will cut its 5 trln euro bond pile on Thursday. Frankfurt’s stimulus reduction plans are behind the Fed and the BoE. It should not rush to catch up. Markets are calm but rising rates and a surge in issuance raise the risk of a tantrum.

Banks’ buyout-debt machine defies quick jumpstart

8 Dec 2022

SocGen, BNP and Deutsche are buying slices of their own European collateralised loan obligations, which turn private-equity loans into bonds. That has echoes of 2008-style excess, but it’s not too risky. Their bigger problem is that the $1 trln market may be inexorably slowing.

Capital Calls: Funky debt shock

29 Nov 2022

Concise views on global finance: Germany property group Aroundtown won’t be the last to flout bond market convention on hybrid debt.

Capital Calls: ABB, Italian budget

21 Nov 2022

Concise views on global finance: The $57 bln Swiss engineering group is selling a minority stake in its car charging unit, as a fallback to volatile IPO markets; premier Giorgia Meloni’s hard-right government targets a budget deficit of 4.5% of GDP in 2023.

UK market watchdogs rely on kindness of foreigners

9 Nov 2022

The Bank of England has intervened in government bond trading twice in less than three years. Both times, selling by overseas funds was partly to blame. British regulators have limited oversight of the $2.4 trln gilts market. Their best hope is help from counterparts elsewhere.

Risky debt selloff has much further to run

28 Oct 2022

Investors are dumping corporate bonds as interest rates rise. Relatively safe investment grade securities have fallen harder than those issued by junk-rated borrowers, which hit $650 bln last year. That will reverse as high-yield debt starts pricing in defaults and a recession.

The urgent search for the perfect inflation hedge

20 Oct 2022

Nearly every major asset class has lost money this year, leaving investors scrambling to protect their wealth from rising prices. Traditional alternatives such as gold and property also have drawbacks, writes Edward Chancellor. The best shield may be the most obvious one.

Sovereign debt greens yet net-zero pledges darken

13 Oct 2022

Saudi Arabia’s wealth fund is the latest public body to issue securities to fund renewable assets. Strong buyer demand and the chance to flaunt action on climate change explain the boom. Yet national decarbonisation targets remain weak, and green bonds do little to improve them.