Central Banks

Coronabonds can issue social goods

8 Apr 2020

Indonesia sold $4.3 bln worth of bonds, partly to tackle Covid-19. It copies a Chinese template. And an unusually long 50-year tranche found favour with life insurers. Investors welcome spin that makes portfolios look responsible, and this one may go viral faster than most.

Japan goes deeper into unknown with $1 trln binge

7 Apr 2020

Prime Minister Shinzo Abe is preparing a stimulus worth 20% of GDP as his government announces a state of emergency to combat the coronavirus. Already at the edges of unconventional monetary policy, Tokyo will now further test new frontiers for public debt in peacetime.

Dixon: Helicopter money is a toy best left alone

6 Apr 2020

Some economists say central banks should fund coronavirus containment efforts by just printing money. That would risk fuelling inflation and undermining economic discipline. There are better ways to finance emergency packages to protect people and companies during the lockdowns.

Beijing tries to fake it ’til it makes it

6 Apr 2020

Local officials and state media are portraying a China back at work. Reassuring consumers is critical to supporting domestic demand as exports crash. But this rosy picture is blurred. Outsiders trying to model a recovery must be more discerning than ever reading the tea leaves.

Mr. Whatever It Takes is Italy’s post-corona card

2 Apr 2020

As ECB chief, Mario Draghi saved the euro in 2012 with monetary policy magic and prevented an Italian default. As Italy crumbles under the cost of a spiralling epidemic, his name has emerged as either the next premier or president. But he shouldn’t rush into either job just yet.

Insurers are next in line for virus dividend chop

2 Apr 2020

Regulators told the likes of Allianz and Aviva to think twice about giving cash to shareholders. Most payouts look safe even after steep market falls. Yet bond downgrades loom, and pressure to help the economy will sap profitability. Unlike banks, cuts may not fall evenly.

U.S. has a handicap vs. Europe in this recession

1 Apr 2020

It’s easier to fire workers in America and welfare is less generous than across the Atlantic. That’s unhelpful for bouncing back from a virus-induced crash. Consumers will be less scarred in countries where businesses retain workers and social safety nets are strongest.

BoE leaves bank traders’ virus paydays in limbo

1 Apr 2020

The Bank of England expects Barclays, HSBC and Standard Chartered to show restraint on future payouts. It’s ambiguous, but enough to worry bankers who profited handsomely from market moves in March. Unless the pandemic ends quickly, big bonuses will be hard to justify next year.

Australia fuels global race to flatten jobs curve

1 Apr 2020

Prime Minister Scott Morrison proposes spending some $80 bln subsidising wages for six months. That would cover about 70% of median pay for most and equal 6.5% of GDP. Increasingly generous pandemic stimulus measures in one country ultimately could help workers in another.

Global central bank stimulus presages gold surge

31 Mar 2020

Worldwide central banks have maxed out monetary stimulus. That makes all safe havens less safe except one. Gold’s growing supply scarcity and rising production costs make it solider than bitcoin, real estate or stocks. The 19th century asset is having a renaissance in the 21st.

Fed’s virus response delivers its everyman moment

30 Mar 2020

The U.S. central bank was criticized for its 2008 financial crisis response that aided Wall Street. The current health emergency is spurring the Fed to help Main Street through small business loans. The move helps counter its elitist image and bolsters its political clout.

Global dividend drought could rival 2009

30 Mar 2020

Companies like Ford, H&M and UniCredit have cancelled payouts. Government curbs and the need to conserve cash mean more will follow. Distributions had more than doubled since the last crisis-induced drop. Pension funds and other income investors will feel the lack of cash flow.

EU divisions risk inflating crisis bill

27 Mar 2020

European leaders failed to agree a joint fiscal response to the pandemic. Despite European Central Bank support, EU inaction makes it harder for Italy and other indebted euro zone nations to ramp up spending to support their stricken economies. That will raise the ultimate cost.

Singapore Airlines secures business-class bailout

27 Mar 2020

State investor Temasek is supporting a whopping $13 bln funding package. Deeply discounted equity and a zero-coupon convertible bond provide other shareholders a chance to bet on a post-crisis recovery. The hard-to-copy playbook could even give the carrier a longer-term edge.

Bank of Japan gives lesson in perils of ETF buying

25 Mar 2020

Unrealised losses on its exchange-traded fund holdings could be as high as $27 bln. Governor Haruhiko Kuroda has reserves that would likely cover that. And in a real pinch, governments can recapitalise central banks. But that may call into question rate-setters’ independence.

Corona Capital: Bailout fees, Distressed junk

25 Mar 2020

Concise views on the pandemic’s corporate and financial fallout: Wall Street brushes off its bailout pitchbooks. And high-yield debt suggests a deluge of defaults.

Beware battered sterling’s rebound

24 Mar 2020

The currency is up from 35-year lows against the dollar. The worst of the pummelling is over, partly due to official efforts to sate a hunger for the greenback. But such demand is still worryingly high and options prices show deep gloom about the pound’s outlook. Caveat emptor.

Fed’s ultra-loose efforts will cast long shadow

23 Mar 2020

The U.S. lender of last resort is living up to its name. The latest extraordinary measures are needed but, like the response to the last crisis, may leave the system vulnerable to further debt buildup and asset bubbles. After the storm, policymakers will need a serious rethink.

Investors have bigger worries than GDP’s nosedive

23 Mar 2020

That U.S. economic output will plunge in the second quarter is clear. Whether it drops up to the 50% evoked by St. Louis Fed boss James Bullard is debatable. What matters more is how long virus shutdowns last and whether there are worse scenarios for investors to anticipate.

Super-stimulus shows what Fed was made for

23 Mar 2020

As Covid-19 decimates the economy, the U.S. central bank pledged to buy unlimited Treasury and mortgage securities as needed, and backstop corporate credit. The resulting moral hazard is tomorrow’s problem. Combatting deflation and unemployment are why the Fed was created.