Central Banks

“Good” rises in bond yields can turn bad

25 Feb 2021

U.S. borrowing costs are climbing. That’s less of a problem for stock markets when the cause is rosier growth prospects. Jay Powell says he isn’t about to tighten monetary policy, the usual party pooper for equity rallies. But inflation concerns would quickly sour the mood.

Fed musical chairs takes away Wall Street’s seat

22 Feb 2021

Chair Jay Powell’s views on jobs make it easy for President Biden to rehire him when his term ends. The same isn’t true of the Fed’s top cop, Randal Quarles. His exit would make space for a more progressive candidate, potentially saddling banks with sterner capital requirements.

Jay Powell makes life harder for Christine Lagarde

16 Feb 2021

Global bond yields are rising, partly because the Fed boss says he wants inflation to run above 2% for a while. That stance will keep short-term interest rates low and the dollar weak. All this is unhelpful for the European Central Bank chief’s fight to support euro zone growth.

BoE preps negative rate gun it doesn’t want to use

4 Feb 2021

Bank of England boss Andrew Bailey told lenders to be ready to cope with sub-zero interest rates at any point from six months’ time. The weapon will be a handy addition to his arsenal. Covid-19 variants or post-Brexit trade frictions may yet derail the growth rebound he expects.

The Exchange: Too much stimulus stores up big risk

26 Jan 2021

That’s the view of Oliver Baete, CEO of Allianz. Markets are pricing in vaccination perfection, as they’ve grown dependent on central bank and government largesse, he tells Rob Cox. But for the $97 billion German insurer, there’s still opportunity to be had in the year ahead.

Corona Capital: Indian banks, LBOs, Stellantis

18 Jan 2021

Concise views on the pandemic’s corporate and financial fallout: Indian banking guru Aditya Puri gives reasons to be bullish about New Delhi’s lenders at a Breakingviews predictions event; the ECB cracks down on risky loans; carmaker Stellantis gets a boost from passive funds.

ECB mantle will cloak Italy’s new political crisis

13 Jan 2021

The country’s government is collapsing amid internal squabbling. That may complicate tapping some 200 bln euros of EU funds, hurting the recovery, or even lead to messy elections. Central bank boss Christine Lagarde’s monetary bazooka should cushion debt market jitters, for now.

Argentina borrows from the Elliott playbook

8 Jan 2021

The country used an obscure but widespread legal clause to argue for dismissing part of a lawsuit over GDP-linked warrants. Paul Singer’s fund once helped push Argentina to default with such wordplay. If Buenos Aires' tactics pay off, other creditors will have to pay attention.

Corona Capital: Icahn, Productivity, Natixis

4 Jan 2021

Concise views on the pandemic’s corporate and financial fallout: Carl Icahn sells half his Herbalife Nutrition stake; an ECB survey suggests Covid-19 will make big firms more productive, but that may not be all good news; and Natixis fast-tracks its overhaul.

Central banks’ debt monsters will need taming

31 Dec 2020

Authorities fought the pandemic by slashing rates and buying bonds, at the expense of pumping up credit further. In 2021, watchdogs can make amends by limiting banks’ exposure to toppy buyouts and shining a brighter light on private loans. They can also skewer credit ratings.

Latin America debt will hit post-crisis sweet spot

22 Dec 2020

Corporate defaults in the region have jumped during the pandemic and political concerns persist. But ultra-low global interest rates and expectations that richer countries could spend more on infrastructure will be enough to entice yield-hungry investors to these markets.

Bank buybacks are a Fed gift nobody needs

21 Dec 2020

The central bank will let lenders resume some stock repurchases, but with limits on how much. It’s no great sacrifice: buybacks are good for earnings per share, but they don’t obviously create value. And it’s not like investors can obviously spend the money better themselves.

Next Hong Kong bourse boss should resist deal urge

21 Dec 2020

Stock exchanges are buying each other and data giants like $27 bln Refinitiv, activity that tempted outgoing HKEX chief Charles Li. Providing a gateway to China, however, is the company’s special sauce. Capital and attention are best focused on the rising threat from Shanghai.

Review: Money’s history proves credibility is king

18 Dec 2020

Jacob Goldstein’s book traces currency’s messy journey from Mesopotamian IOUs to bitcoin. He shows it has always been based on shared beliefs and trust, and is closely connected with the development of political freedom. Turns out, curbing power may be key to making money work.

Currency manipulator label is Trump gift to Biden

16 Dec 2020

The U.S. Treasury says Switzerland and Vietnam are skewing their currencies’ value against the dollar. Technically, it’s right. The president-elect can ignore this mostly symbolic move when he takes power in a month. Then again, some modest trade friction may be useful at home.

ECB fiat anoints unlikely bank dividend heroes

16 Dec 2020

The regulator capped payouts as a proportion of earnings and assets. Well-capitalised lenders with richer valuations, like Nordea and KBC, now offer tiny yields compared with minnows like Liberbank. The risk is that a slow recovery causes restrictions to last beyond September.

Corona Capital: New York City, Fed/climate change

15 Dec 2020

Concise views on the pandemic’s corporate and financial fallout: New York City’s exodus puts local government in a tight spot; the Fed’s belated move shows a change in Washington.

BoE leaves UK lenders in investor purgatory

11 Dec 2020

The supervisor will let HSBC, Lloyds and others resume dividends and share buybacks next year. But its new “guardrails” will limit the sector’s overall yield to around 2%. While the original ban made sense, lingering restrictions may further raise banks’ cost of capital.

Christine Lagarde’s baby bazooka needs backup

10 Dec 2020

The ECB boss will deploy emergency stimulus measures, such as asset buying and ultra-cheap loans to banks, for longer but came up with no new tricks to boost Europe’s economy. Central bankers have been innovative in the crisis. It’s now governments’ turn to do more of the work.

Fed avoids dent to its chain mail of independence

2 Dec 2020

The U.S. Senate passed over Judy Shelton’s nomination to the central bank’s board. A few Republicans joined Democrats in questioning her partisanship. The Fed would benefit from more diverse voices. But she was a bad fit for an institution already under political pressure.