Bonds

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.

Ford shouldn’t be tarred by GM brush

13 Apr 2005

Both US carmakers have issued profit warnings amid rising competition and healthcare costs. S&P rates both equally one notch above junk. But Ford has stronger cash flow generation and is realistic about its problems. GM looks like it deserves to be junked. But Ford doesn't.

ISS bondholders may get a reprieve

7 Apr 2005

The Danish group s bond prices plunged after it received a leveraged buyout approach. But LBO lending banks may not want ISS s shorterdated bonds to remain outstanding. The company may have to tender for them.

Cablecom replaces bank loan with new bond

29 Mar 2005

The Swiss cable group has sold a E800m bond that resembles a bank loan dressed up in capital markets camouflage. Here is further evidence of hedge funds disintermediating banks from the credit market.

Bonds race from conundrum to contagion

18 Mar 2005

Last month the Fed was worried that yields were too low. Now credit spreads have ballooned in response to GM s profit warning. This shows how hard it is to manage an overleveraged financial system and to predict whether credit will crunch or recover again.

Citi bond trade brings back eerie memories

1 Feb 2005

A memo from just before last year's controversial trade spoke about turning the European market into something more like the US bond market. This has echoes of the 1991 cornering of the US Treasury note market. The guilty party then was Salomon Brothers now part of Citi.