Debt

George Soros’ 1980s US debt warning echoes today

8 Nov 2024

The hedgie said in 1986 that booming stocks belied shaky government finances. That’s true now, and not just in the United States. Britain and France are also battling a fiscal trilemma, where states can’t simultaneously have high spending, low taxes and financial stability.

China consumer is epitome of delayed gratification

4 Nov 2024

Beijing says it wants to boost consumption’s 53% share of GDP as investment-led growth fades. Yet central planning is hard to square with free-spirited spending. Rebalancing without a period of stagnation is not easy. Recent policies also suggest the old model is hard to ditch.

Thames debt rejig is oddly good deal for creditors

25 Oct 2024

The ailing UK water utility wants bondholders to defer repayments and give it an extra 3 bln pounds. Investors defer a messy default now and earn an equity-like return on the new money. And they can hope that PM Keir Starmer will agree to price rises, lowering future losses.

Deutsche hits bad-debt snag on road to growth

23 Oct 2024

The German lender returned to profit in the third quarter but also said its full-year loan-loss provision would jump to 1.8 bln euros. It’s the second quarter in which CEO Christian Sewing has surprised investors on bad debt. The shock distracts from investment-banking growth.

China pins stimulus on money merry-go-round

23 Oct 2024

Beijing plans to swap some of its $9 trln of local government debt into bonds with full, rather than implicit, state backing. The rejig will lower rates of interest, lengthen maturities and allow provinces to issue more debt to banks. That will juice spending for a while.

Italy has more to gain from France’s pain

14 Oct 2024

Rome borrowing costs are converging with Paris. Prime Minister Giorgia Meloni’s stable government is pledging to contain its deficit and pushing through reforms, at a time when its peer is in turmoil. To press home the advantage, though, Meloni will need to take bolder action.

Debt feast helps buyout firms through IPO gloom

7 Oct 2024

Dividend recaps, where private equity managers pile debt onto a company to give themselves a payday, are booming, with $17 bln in the US last month. Since public offerings look tough, it’s a handy cash-raising alternative. The trend will continue, if the economy plays ball.

Greece is unlikely victor in bank selldown race

3 Oct 2024

Athens sold 10% of National Bank, effectively ending the privatisation of the major lenders it rescued. Germany, the Netherlands, the UK and Ireland still own bank stakes. Greeks can thank continued government support and a strong economy, fuelled by rising investment.

Thames creditors face messy flush, or deep rinse

30 Sep 2024

The UK water company is running out of cash and racing to raise equity. A new investor would want a big chunk taken out of its 16 bln pound debt load, which may fall heavily on bondholders who can’t put up new money. Even that may be preferable to a government-led overhaul.

China plays perilous game of pump the stock market

30 Sep 2024

Shares in consumer and real-estate firms have jumped more than a fifth after the latest round of state support raised hopes of a broad recovery. The risk is that when policymakers in Beijing flesh out their plans, the details will fall short of what investors are expecting.

India’s mortgage IPO builds on many riches

16 Sep 2024

Shares of Bajaj Housing surged 125% on their debut. That reflects faith in its $56 bln investor darling parent and robust demand for expensive homes. It also hints at deep scepticism among sellers about the sustainability of rich valuations in the country's equities market.

China’s banks have a nasty case of indigestion

11 Sep 2024

For decades, Beijing leaned on lenders to fuel growth in the $17 trln economy. But it will take years for them to digest problem IOUs from firms and local governments. Officials will have to find new ways to boost GDP, or the financial dyspepsia could turn into something worse.

Euro-banks offer glimpse of possible bad-debt wave

24 Jul 2024

Deutsche upped its forecast loan-loss charge, contributing to a 7% share-price fall. BNP’s default provision spiked, and UniCredit’s has too in Germany. Most of the bad news relates to just a few specific corporate clients. But there will be more if rates stay higher for longer.

UK gilts are ready to regain their long-lost shine

12 Jul 2024

British government bond prices are off 24% in three years due to a budget crisis, tight monetary policy and political turmoil. Yet the UK now has a fiscally austere new administration with a big majority and a central bank ready to cut borrowing costs. That could stop the rot.

Victorian rail mania has lessons for AI investors

12 Jul 2024

Excitement over artificial intelligence has spurred a wave of investment. In the mid-1840s, British speculators similarly went wild for another capital-intensive technology: railways. The historic boom and subsequent bust provide a salutary warning for today’s hyped-up markets.

Markets will keep shaky French regime on a leash

11 Jul 2024

A left-wing coalition and Emmanuel Macron’s centrists are vying for control of France’s government. Fiscal discipline may fall by the wayside. Paris is already being disciplined by Brussels for its high deficit and debt. A reliance on foreign investors leaves little wiggle room.

China’s central bank is stuck in a policy dilemma

9 Jul 2024

The PBOC is now intervening in short-term debt markets. Ideally it should be cutting rates to help spur more investment in the economy. But that would mean giving in to traders parking their money in government bonds – and would conflict with its mandate to foster a strong yuan.

Le Pen will fail as star of Meloni in Paris

3 Jul 2024

Markets are relatively calm about the prospect of a far-right government after Sunday’s second electoral round. They may believe that Marine Le Pen’s party would mimic the apparent moderation of Italy’s Giorgia Meloni. Her fiscal plans, inexperience and beliefs suggest otherwise.

New UK government can claim competence dividend

2 Jul 2024

Eight years of political upheaval and economic uncertainty raised the risk premium for investors. Now the centrist Keir Starmer is set to take over, while France and the US face electoral turmoil. For the first time since the Brexit vote, the country looks a relative safe haven.

Ukraine bondholders’ haircut is a necessary evil

1 Jul 2024

The stricken country wants holders of $20 bln of private sector debt to take a big hit. In ordinary times, Kyiv’s request would be galling. Yet paying foreign fund managers may annoy Kyiv’s public sector backers. And the stigma of default matters less in wartime.