Bonds

Fed rate hike brings closer yield-curve inversion

13 Dec 2005

If the Fed continues raising rates, the yield curve is likely to invert next spring. This will not necessarily hurt the US economy. The example of New Zealand shows that rising shortterm rates attract hot money flows, boosting home prices and consumer spending.

DP World hits on neat petrodollar arbitrage

1 Dec 2005

The Dubai ports operator has come up with an innovative $2.8bn convertible bond to finance its acquisition of P&O. It is exploiting a valuation discrepancy between the redhot Abu Dhabi stock market and relative tepid Western ones.

Greater fools support buyout recap boom

29 Nov 2005

The vogue for recaps looks daft from the lenders perspective. They are taking more risk, and being paid less for it. But lenders aren t dumb. They ll lend so long as the secondary market will buy the risk.

Investors pay high price for Wind junk bonds

23 Nov 2005

On current mobile sector multiples, the Italian group s enterprise value barely exceeds the value of its debt. Yet bond investors are receiving singledigit coupons on their investment. That s pretty punchy.

Italy should open its bond markets

27 Oct 2005

Icap, the UK broker, is moving closer to establishing a market for Italian sovereign debt to rival local exchange MTS. After the Antonveneta debacle, Italy has a second chance to show it will treat foreign entrants into its financial services markets fairly.

Bond conundrum stretches ever further

21 Sep 2005

The UK s new 50year inflation linked bond will yield a feeble 1.2%. Compare that to the 3.3% yield on inflationprotected equities. But demand for the issue has been strong. This is a triumph of regulation and a strange bond market over common sense.

Fed has mishandled oil price boom

16 Sep 2005

The policy of accommodating high oil prices with loose money has kept demand buoyant but stored up future trouble. America s debt problems are worse; and inflationary risks have increased. The Fed should increase rates sharply to rein in demand.

Wind forced to pay up to get debt away

2 Aug 2005

The buyers of Europe's largest leveraged buyout must pay an extra 1% to syndicate an E700m slice of junior debt. That may not sound much in a E12bn deal. But Wind has still to sell scads of junk debt. If the cost of that rockets too, it could hurt.

Bayer jumps on hybrid debt bandwagon

19 Jul 2005

The German conglomerate s successful E1.3bn offer is just the latest in a string of issues of deeply subordinated debt. The high yields are proving popular with investors. The debt s ability to cheaply finance takeovers will attract more issuers.

Who wants 50-year gilts?

15 Jul 2005

Not many investors, judging by the tepid response to the latest auction. Few pension funds want to look quite that far ahead. It looks like a small victory for common sense. These bonds offer both low returns and the potential for significant real losses.

Now for the real Eurotunnel battle

19 Jun 2005

Eurotunnel s chairman may be able to soften his stance towards creditors after surviving a crucial shareholder vote. But the battle between shareholders and creditors during Eurotunnel s £6.3bn debt restructuring will still be a painful one.

Veolia to offer inflation-linked bond

2 Jun 2005

The French utility hopes to tap into rising demand for such debt. And it would provide a natural hedge for the regulated business. But the time to issue such bonds is when inflationary expectations are high. That is hardly the case right now.

CDO prices swing wildly

20 May 2005

The risky tranches of CDOs may look cheap after recent losses. But distressed investors don t have the confidence in valuations to wade in. This is a recipe for price volatility. And that means hedge funds losses on complex derivatives are yoyoing up and down.

Man Utd’s PIKs have a twist

17 May 2005

The payinkind financing Glazer used to buy the football club isn't the usual kind. He has juiced it up with security and a high yield. The PIK market turned some time ago. Glazer's PIKs are a posttopofthemarket phenomenon.

Eurotunnel revolution devours its own children

26 Apr 2005

The rebels kicked out management last year because they felt a rescue plan involving a debtforequity swap was "appeasement" of creditors. Now, having failed to come up with anything resembling a plausible plan, they face an even bigger haircut.

Intesa pursues jumbo E10bn loan sale

26 Apr 2005

The Italian lender is breaking new ground by trying to sell a giant chunk of its nonperforming loans, all in one go. That would help clean up Intesa s balance sheet. But it s not clear that agglomerating the loans for sale is the best way of creating value.

It’s time for investors to support Argentina

20 Apr 2005

Both the IMF and the US Treasury say Argentina should reopen its debt swap to include holdouts. This is a terrible plan. If it succeeds, investors in sovereign debt can wave goodbye to marketbased restructurings.

Bond buyers should listen to ECB

19 Apr 2005

The central bank is worried about longterm inflation. But investors have pushed eurozone bond yields to nearrecord lows. They think slow growth is deflationary. But inflation can rise with low demand. Eurozone money supply is increasing too fast for comfort.

Fiat denial should be taken with a pinch of salt

19 Apr 2005

Just because the Italian group isn t seeking to renegotiate a E3bn convertible loan with its banks doesn t mean that there won t be talks. The banks would clearly benefit from stopping the conversion and Fiat might too. But negotiating new terms will be tricky.

Piaggio’s E150m bond will test jittery markets

14 Apr 2005

The maker of Vespa plans to issue a highyield bond to refinance a bond issued by Aprilia, the motorcycle maker it bought last year. Market conditions are hardly ideal. But if Piaggio fails, major shareholder Colannino will foot the bill.