Bonds

Central banks will give risky debt a helpful shock

13 Jan 2022

Benchmark bond yields are rising as rate-setters around the world scale back asset purchases. That will reduce the appeal of corporate debt, but a correction in credit markets is nothing to fear. A setback may lead to less hazardous terms for bondholders, and a rout is unlikely.

European banks’ league-table loss is investor win

10 Jan 2022

Dealmakers at Credit Suisse, Barclays, UBS and others are losing market share in their home region. Fighting back is costly and futile given the advantages of U.S. behemoths like JPMorgan. Better to slim down and focus on key niches, as Deutsche Bank has with bond underwriting.

China’s next debt crisis will be municipal

10 Jan 2022

Local government investment vehicles owe $8 trillion, over half national GDP, and are big dollar bond issuers. Collapsing property sales and Omicron stress are squeezing them. Beijing may let some default; others might try to dump assets in a weak market. It could get ugly.

Reliance channels its name in 40-year bond

6 Jan 2022

It sold the longest tenure paper by an Indian firm as part of a $4 bln deal, on the back of a big successful expansion into consumer businesses. Bagging cheap funding now looks smart. But as China’s tech upheaval shows, four decades is plenty to test India’s reliance on Reliance.

China property debt crisis puts founders on spot

7 Dec 2021

Investors are pushing troubled developer Kaisa to avoid default and follow rival Agile’s lead by selling bonds that convert into equity. That, and other options on the table, present founder-executives with a hard choice: cede prized majority control, or risk insolvency.

Bondholders are biggest losers in telco LBO frenzy

1 Dec 2021

Telecom Italia’s bonds fell on fears that the securities may not be redeemed if KKR’s $37 bln buyout succeeds. The M&A boom has made unexpected targets of large public companies. Even when investors enjoy stronger protections, as with UK rival BT, these offer limited solace.

UK wades into central banks vs. markets fray

4 Nov 2021

Bank of England boss Andrew Bailey has a different mandate from Fed Chair Jay Powell. But his basic challenge is the same: persuading investors that interest rates won’t rise as much as they think next year. The Briton’s old-school inflation target makes his job harder.

Funky debt offers SoftBank fix for UK retail hole

3 Nov 2021

Masayoshi Son’s group has an option to buy part of the e-commerce unit of stricken retailer THG, in which it owns a stake. Honouring that would mean big losses, but walking away could amplify the UK group’s woes. Investing in a new convertible bond might buy time for a recovery.

Central bankers’ word is no longer their bond

1 Nov 2021

The Reserve Bank of Australia has for several days stopped defending a debt yield target. Such unreliability makes asset prices jumpier. Breaking faith is especially unadvisable when high inflation means rate-setters need markets and the public to trust them more than ever.

ECB needs a louder megaphone to reach bond markets

28 Oct 2021

President Christine Lagarde said she won’t hike rates as soon as investors anticipate. But that didn’t change their expectations and euro zone debt yields rose. She will have to do a better job of convincing them if she is to avert an unwanted tightening in financing conditions.

Credit Suisse’s exorcism has only just begun

20 Oct 2021

Chair António Horta-Osório banished one demon by settling a Mozambican scandal for $475 mln. The Swiss bank also closed the book on a spying saga. Yet a U.S. deferred prosecution agreement prolongs the haunting. And the ghosts of clients Greensill and Archegos still linger.

EU cheer only partly masks green bond shortcomings

12 Oct 2021

The bloc’s debut 12 bln euro issue of debt earmarked for environmental aims was a big success and may encourage more launches. But such securities only incentivise sustainable behaviour if issuers can borrow at cheaper rates. That’s not always the case.

Big Tech’s cash kings will resist rate-hike storm

12 Oct 2021

Rising U.S. Treasury yields reduce the value of future free cash flow, hurting fast-growing technology stocks. Apple, Facebook and Alphabet are minting money in the here and now. It’s investors in cash-challenged companies like Netflix and Tesla that will feel the most pain.

Easing crisis leaves Lagarde with tough transition

30 Sep 2021

The European Central Bank boss will have to fall back on a pre-pandemic bond-buying scheme once its emergency purchase programme runs out. The former is less flexible and may force Christine Lagarde to choose between flouting rules or curtailing support to the fragile economy.

Capital Calls: Lagarde channels Thatcher

9 Sep 2021

Concise views on global finance: The ECB boss will buy fewer bonds but tells markets: “The lady isn’t tapering.” A tough decision on whether to scale back bond purchases more decisively will come later.

Zambian sunlight could disperse Chinese debt fog

18 Aug 2021

The African state’s new leader, Hakainde Hichilema, has to forge a deal with creditors after last year’s default. Getting China to the table won’t be easy. Lifting Beijing’s veil of secrecy by revealing Lusaka’s loans would remove the biggest barrier, and set a good precedent.

Italy’s bank rescue has side order of moral hazard

10 Aug 2021

UniCredit may buy most of sickly Monte dei Paschi, with government help. It’s unclear if that means taking on its junior debt, which would be a windfall for creditors at the expense of Italian taxpayers and EU rules. Yet bond markets are starting to hope for something juicy.

Rush for inflation insurance hedges faith in Fed

5 Aug 2021

The price of 10-year inflation-linked U.S. debt keeps hitting new highs. This partly reflects how expensive normal Treasuries have become. It also suggests investors are worried that price pressures could last far longer than U.S. central bank boss Jerome Powell expects.

Bonds and equities both mislead on future growth

4 Aug 2021

The fall in U.S. bond yields would normally flag an economic downturn, while record highs for the S&P 500 Index ought to be a sign of a brighter future. Central banks are distorting price signals. The reality – and growth – is likely to be somewhere in the middle.

Guest view: Investing when inflation is a mystery

23 Jul 2021

Trying to outguess asset prices on how fast consumer prices will rise is pointless, Gerard O’Reilly, chief investment officer at Dimensional Fund Advisors, says. Better to focus on ways of outpacing or hedging against what’s anticipated by market gauges of inflation expectations.