Bonds

Mini-me monoline puts sector’s woes in sharp relief

5 Feb 2008

Primus says it s not a bond insurer. But it sure looks a lot like one. Like them, it just reported a big marktomarket loss on its credit insurance portfolio. Since it doesn t insure muni bonds, its problems provide unalloyed insight into monolines structured credit dilemmas.

Egg on many faces as UK credit tightens

4 Feb 2008

Citigroup s UK internet bank has shown how not to cut off customers. Rivals should not follow its example. Banks have quadrupled credit card lending in a decade. They should retreat judiciously. Reputation, client relations and the economy are all at risk.

Wary banks undercut Bernanke’s credit push

4 Feb 2008

The US Fed chairman has pumped cash into Wall Street. But banks have cut back on real estate and commercial lending nonetheless. It makes sense for them to raise standards and charge more interest. But their dwindling risk appetite bodes ill for attempts to boost the economy.

Fear and loathing and lost wages

1 Feb 2008

The American Securitisation Forum s hordes gather in Las Vegas this week. The subprime mortgage and CDO debacle has left them bruised. But it s not all bad other securitisation markets are still open for business.

MBIA takes one step forward, two steps back

31 Jan 2008

The bond insurer moved fast in recent months and raised $1.5bn in new capital. Its competitors missed that opportunity. But MBIA s $2.3bn loss puts it in the same boat as its rivals. Scraping together more capital now will be tough. And it s unclear how much it really needs.

Deutsche may pay for succumbing to real estate froth

31 Jan 2008

The bank lent $5.8bn to real estate mogul Harry Macklowe. Now he can't repay the loans so Deutsche is stuck with seven office buildings. Sure, the deal was cut at the top of a frothy market, but the bank should have understood the risks. Deutsche could be facing a big loss.

UBS’s third warning creates more questions than answers

30 Jan 2008

By putting a number SFr4.4bn on its 2007 loss, the Swiss bank has ended one guessing game. But the size of the number has kicked off some others. One is why the loss is about SFr4bn more than analysts expected. Another is how long boss Marcel Ospel can hang on.

Bernanke’s risk management is fraught with risk

30 Jan 2008

The Fed chief thinks the central bank needs to cut rates fast and decisively when outsized market turmoil threatens to hurt the real economy. But this assumes the Fed will raise rates when the threat recedes. That flies in the face of history and market psychology.

What bank CEOs should know

29 Jan 2008

Wall Street was hammered by repackaged subprime mortgages. SocGen took a hit on equity futures. Modern finance is about taking risk through complex instruments. Bank CEOs need to understand these products, but many don t. Here s a starter kit of questions for shareholders to ask.

Wall Street’s murky assets shed some light

29 Jan 2008

Whether toxic or just hard to value, investment banks' level 3 holdings are revealing. Lehman and Morgan Stanley putting commercial property assets in the hardtovalue bin could be worrisome. Goldman Sachs, on the other hand, has already been snapping up distressed mortgages.

Bond insurer bailout will – and should – fail

24 Jan 2008

A regulator s plan to get banks to stump up capital to support the flagging monoline insurers is fraught with problems. And there are good reasons it should fail. Chief among them is it would repel others from entering the market and providing insurance at sensible rates.

Buyout debt malaise bad news for LBO equity

23 Jan 2008

It s difficult to value buyout firms equity stakes. But the declining price of LBO debt hints at malaise in equity values too. Unless they re forced to sell, buyout shops can hope for a rebound. But credit markets appear to have little faith in their businessbuilding skills.

Regulators should bar bond insurers from structured finance

22 Jan 2008

Forcing them to focus on muni bond business is better than bailing them out. It would make underwriters and ratings agencies take more blame for their loss estimates on structured products. And it would allow investors to get a better handle on the insurers true prospects.

Bond insurers face a grim future

16 Jan 2008

Ambac s huge loss has further eroded the sector s credibility, just when it needs investors to pony up more capital. The bond insurance business is besieged on many fronts. If it survives, it will be a shadow of its former self.

Banks should come clean about CDOs

16 Jan 2008

CDO disclosure: after more than $130bn of subprimerelated writedowns, banks still expect investors to accept on faith their valuations of toxic CDO positions. Financial institutions could take several steps to add more clarity. Antony Currie and Jeff Goldfarb explain.

Hung LBO loans no longer matter

14 Jan 2008

Despite difficulties offloading these deals, they don t pose much of a threat any more. A lot of deals have been cancelled and banks will probably sell the remainder without taking huge hits. That may be little solace though, as their other business lines are souring.

Is Capital One the canary in the consumer credit mine?

10 Jan 2008

The credit card and car loans giant has slashed its 2007 profits estimate by 20% because of rising loan defaults. Its business model should protect it from becoming the next Countrywide. But it still bodes ill for the US economy.

UK credit squeeze has started: official

3 Jan 2008

A Bank of England survey shows how dramatically UK banks mood has changed. Harsh months lie ahead as lending to corporates and households is cut. The BoE will try to respond with more rate cuts but, for now, financial winter has the upper hand.

Borrowers face high costs reworking debt to avoid default

3 Jan 2008

Lenders are demanding that companies needing to restructure loans pay nearly three times the fees they did back in June, as well as a lot more interest. Squeezing iffy borrowers could push them over the brink. But lenders have good reasons to do so anyway.

Buffett’s late-year deals could be just the beginning

31 Dec 2007

The Sage of Omaha s move to start a bond insurer is just the latest example of Berkshire Hathaway s strength amid disarray elsewhere in the financial sector. This and other deals announced by Buffett over the holidays could be just a taste of things to come in 2008.