Bonds

ECB’s crisis weapon pledge is vague and late

15 Jun 2022

The European Central Bank will “accelerate” work on a new tool to control soaring bond yields from weak sovereigns. The lack of detail reflects divisions within the bank on when and how to use such a programme. It’s an invitation to markets to test the ECB’s resolve yet again.

Central banks still have space to fight inflation

15 Jun 2022

Jerome Powell and Christine Lagarde are tightening monetary policy to try to control soaring prices. Previous shocks have prompted the Fed and ECB chiefs to pause or loosen again. Despite plunging equity prices this time, calmer credit markets imply the “Fed Put” is far off.

Crashing yen disturbs Haruhiko Kuroda’s zen

15 Jun 2022

Japan’s currency is at its weakest against the U.S. dollar since 1998 and bond traders are revolting. It disrupts the central bank governor’s meditations on the mystical balance between growth, public debt and near-zero rates. Stagflation risk suggests a new mantra is warranted.

Italian banks face return of sovereign embrace

14 Jun 2022

A decade ago, soaring government bond yields threatened to drag down domestic lenders. Today, banks have shrunk state debt to less than 7% of total assets, while cutting dud loans and building capital buffers. As the ECB retreats, the pressure to load up again will increase.

ECB’s farewell to QE may prove premature

8 Jun 2022

The European Central Bank may on Thursday confirm plans to end its 3 trln euro asset purchase programme and raise rates in July. Weaker economies’ borrowing costs are already soaring. A mere hint that bond-buying could resume if yields jump may not be enough to keep markets calm.

Chinese property crisis drives derivative rethink

7 Jun 2022

Beijing has helped some private developers with bond issues by letting them offer protection via tools like credit risk mitigation warrants. So far it’s symbolic and over-reliant on reluctant state banks. If private money can be wooed, however, the market could finally take off.

China’s real estate renovation is too cosmetic

26 May 2022

The central bank joined wider efforts to help the property sector by cutting five-year lending rates to 4.45%. Banks remain sceptical of developers however, and bonds are trading at distressed prices. Lack of faith in the industry’s foundations make it harder to build a recovery.

Russia plays the fool in its own default theatre

3 May 2022

Moscow looks set to meet foreign currency bond payments, after saying a month ago it could only pay in roubles. High oil and gas prices mean it has ample revenue to meet its obligations. But the debt grandstanding may not yet be over, notably if the EU imposes an energy embargo.

UK grocer buyout creates bond market indigestion

29 Apr 2022

Banks led by Goldman and BNP Paribas that funded CD&R’s $9 bln Morrisons buyout have sold a chunk of the debt at a big discount. Inflation and a supermarket price war mean bondholders can now name their price. The debt hangover may make other deals trickier.

China takes new tack on emerging market debt

27 Apr 2022

Beijing has agreed to work with the Paris Club of official creditors to clear up Zambia’s $17.3 bln debt mess. That’s a major shift from the bilateral approach it usually adopts. An even bigger sign of progress would be accepting a haircut on the $5.8 bln that China is owed.

Draghi’s bond-buying triumph lacks obvious sequel

13 Apr 2022

The ECB’s plans to tighten monetary policy and the Ukraine war revive fears that weak euro zone members’ borrowing costs will soar. Though the former central bank boss tamed debt spreads in 2012, a repeat is tricky. Besides, governments that struggle can use tools Draghi devised.

Where odd U.S. yields lead, Europe will follow

30 Mar 2022

Two-year U.S. Treasuries briefly yielded more than 10-year ones. There’s some way to go before such an inversion happens in the euro zone. But high inflation pushed German two-year bond yields into positive territory for the first time since 2014. A replay may be on the cards.

Bank of Japan stumbles into defensive minefield

29 Mar 2022

War, Covid-19 and an aggressive-looking Fed are conspiring against Governor Kuroda’s ultra-loose policy. The yen is plunging and government bond yields are up despite BOJ efforts. There’s no easy solution, but doing nothing is risky too.

Russia kicks default drama into future

17 Mar 2022

Moscow says it sent $117 mln due in bond interest payments. While sanctions made the decision painful, not paying its dues or offering roubles instead of dollars would have meant years of legal disputes and made the economy even more dependent on oil. That may still happen.

Refugee bonds can keep humanitarian corridors open

11 Mar 2022

Europe says 7 mln Ukrainians may flee Russia’s invasion. The 2015 refugee crisis showed migrants can boost workforces and economies. But integrating new arrivals is expensive. Impact bonds can pay for the upfront resettlement burden, limiting quarrels between host nations.

Russian debt coin toss will get harder to call

8 Mar 2022

Gazprom and Rosneft are repaying bonds despite fears Moscow may renege on its own debt. The depressed prices of Russian corporate debt mean investors who rightly bet on repayment can double their money. Yet rising tensions and murky workouts mean the trade will get riskier.

Yandex bond woes are first step to state takeover

7 Mar 2022

The U.S.-listed Russian tech group may default on a $1.25 bln debt. Even if it cuts a deal with creditors, the economic hit from sanctions will crush its revenue from e-commerce and selling ads. President Vladimir Putin’s internet goals make eventual nationalisation likely.

Western curbs give Moscow rational default card

3 Mar 2022

Sanctions mean President Vladimir Putin has reason not to repay at least some of his $200 bln of debt, and less fear of the consequences. That would leave creditors stuck for years, with little hope of a recovery. Even depressed prices of Russian bonds may prove optimistic.

Viewsroom: Ukraine, ECB and India’s giant insurer

17 Feb 2022

Worries about an invasion of Ukraine have rattled markets, but Dasha Afanasieva says Russian investors are more sanguine. The European Central Bank faces a tougher inflation juggling act, argues Swaha Pattanaik. And Una Galani discusses the listing of India’s Life Insurance Corp.

ECB has central banking’s hardest juggling act

15 Feb 2022

President Christine Lagarde faces a less acute inflation problem than U.S. or UK peers. But she’ll have to raise interest rates to curb price pressures while ensuring bond yield gaps between euro zone nations don’t widen to worrying levels. The two goals may become incompatible.