Bonds

This time could be different in credit market

25 Jun 2007

Neither the GM downgrade nor the Amaranth failure durably widened spreads. But US mortgage problems might mark the end of easy credit. Mortgage losses could exceed $100bn. With bond yields rising and central banks unlikely to cut, the risk of a lender retreat is high.

Rising bond yields could hit equities

19 Jun 2007

As yet, stock markets have shrugged off the halfpercentage point increase in yields. But the complacency may not last. A rising cost of capital means a falling value of equities. And the threat of higher inflation would make investors more wary about shares.

Bear’s woes show subprime saga has further to run

18 Jun 2007

The relative quiet of late created a false sense of security. The investment bank s mortgage hedge fund troubles put an end to that. But the subprime stumble was never a onequarter affair. The nature of the mortgage market means pockets of pain will emerge for months.

Loan market quirk may delay LBO reckoning

14 Jun 2007

The surge in yields may look bad for buyout shops reliant on easy credit from collateralised loan obligations to fund their acquisitions. But CLOs need to make loans to back the bonds they ve already issued. Even if rates skyrocket, this could allow LBO shops one last binge.

Markets face up to grimmer reality

8 Jun 2007

Thursday was a very bad day for bonds and stocks. Investors are finally catching on that inflation is not under control. Rates should keep rising, and shares could drop. Falling confidence and receding liquidity also increase the risk of a financial crisis.

Tata’s $2500 car threatens carbon targets

5 Jun 2007

The price of the first model, coming in 2008, is set to be 40% lower than its nearest rival. It s good news for emerging market consumers. But if the vehicle catches on, the production of carbonspewing cars will accelerate. Development doesn t fit will with emission controls.

New credit index sharpens buyout bears’ claws

21 May 2007

An index of credit derivatives on junkrated loans is about to debut. It could further stir the frothy LBO debt market. But it may also lure some credit bears out of their lairs. They can use it to bet on a buyoutbusting downturn in the junk loan arena.

Cablevision shareholders get a decent offer – finally

3 May 2007

Its independent directors sent the founding Dolan family packing twice before agreeing to a $22bn deal. The price is fair. The deal now has a better chance of being accepted. By holding out for a fair sum the directors have paradoxically done the Dolans a favour.

Amgen shows perils of being aggressively clever

20 Apr 2007

The biotech giant s sale of $5bn worth of cheap convertible debt to buy back stock looked mighty smart last year. The only problem the stock is down 12% since because Amgen s attempt to expand its main drug into a minor area blew up in its face.

Do credit derivatives undermine monetary policy?

19 Apr 2007

They might, warns ECB chief Trichet. The distribution of risk among unregulated firms may further dull central banks already blunt tool. If so, a market that has recently grown by leaps could make it harder for policymakers to mop up excess liquidity and rein in inflation.

Moody’s bank ratings may be stock bellwethers

12 Apr 2007

The firm watered down its new system, which assigned top ratings to banks that can rely on bailouts, after credit investors squawked. But the system may have value for stock buyers. The topranked banks aren t subject to the market s full discipline. They should be avoided.

Eurex credit debut shouldn’t spook dealers

3 Apr 2007

The exchange convinced only one major firm to support its new credit futures contract. But dealers don t need to freeze it out. When Wall Street s big products debut on exchanges, they typically capture only a fraction of the market s potential business.

Oil-rich Gulf looks to diversify funding

29 Mar 2007

Corporate bonds from companies in the region grew almost sixfold in 2006, to $18.2bn. Much of the money came from foreigners. Why not just borrow from oilrich neighbours? International bonds provide prestige and help prepare for a less oilrich future.

Junk debt investors ignore rating agencies

28 Mar 2007

Credit investors keep piling into highyield debt, pushing spreads down to historically low levels. The agencies are predicting higher defaults in 2007, perhaps tipping the bonds into loss. Of course, the agencies were too gloomy last year.

Some credit investors have power

26 Mar 2007

Excess liquidity has given borrowers the upper hand almost everywhere. But European highgrade lenders have clawed back some ground. Marks & Spencer is the latest borrower to offer protection against junking. The explanation: excess liquidity has made the risk unbearable.

CLOs susceptible to a fire sale

23 Mar 2007

If the managers of these funds of highrisk debt take fright, they might try to head for the exit simultaneously, causing a rout. There would, of course, have to be a trigger. But if the market jitters of recent weeks return, CLOs could be a flashpoint.

LBO borrowers have lenders over a barrel

19 Mar 2007

TDC isn't bothering to refinance its buyout debt. It is simply "repricing" its existing debt to get a better deal. Lenders have little choice but to comply. Despite the turmoil in US subprime borrowing, it seems demand for LBO debt is stronger than ever.

Loose lending may ensnare LBO borrowers

19 Mar 2007

Easy terms on LBO loans will give fundamentally strong companies extra breathing room to ride out economic downturns. But those with serious problems could use this flexibility to delay tough decisions, increasing the risk they will eventually default. Socalled "covenantlite" LBO loans will give fundamentally strong companies extra breathing room to ride out an economic downturn.

US consumption robust despite subprime woes

19 Mar 2007

A wave of defaults among less creditworthy homeowners will create only a modest drag on consumer spending. But problems at the lower end may filter up. If house prices fall further and lenders pull back, mortgagedfinanced consumption may shrink.

LBO shops still have the whip hand over bond investors

19 Mar 2007

US bond investors are howling after discovering some poison puts safeguards against LBOrelated losses are not that toxic. In the tugofwar between debt investors and LBO shops, the former will only prevail if there is enough hemlock in the chalice.