Debt

Banco Popular creditors get a shareholder airbag

3 Feb 2017

The Spanish bank's stock fell after it took bigger than expected losses. Yet it took steps to protect hybrid debtholders from losing their coupons. Bondholders have an edge over banks: even if it's possible to inflict losses on them, the pain may be more bother than the gain.

Europe’s “whatever it takes” becomes “what next?”

2 Feb 2017

Bond yields are rising as the end of money-printing looms. The return of a crisis like the one that prompted ECB President Mario Draghi's pledge to save the euro zone is unlikely. Yet as investors focus on political risk and debt, governments will face tougher choices.

French elections beat Brexit for market disquiet

30 Jan 2017

The Gallic vote is worrying investors more than Britain leaving the EU. It now costs over a third more to insure against a French default than a UK one, though rating firms see little chance of either going bust. It's the scope to weaken its currency that gives Britain an edge.

EU banks handed new way to lose business

9 Jan 2017

The European Central Bank will set tougher rules than American peers to limit risky lending. The limits could make it harder for Europe’s banks to compete with U.S. or UK ones in lucrative private equity deals. The upshot may be safer lenders – but ones that make even less money.

Regional pain makes UK consumer credit risks real

6 Jan 2017

The BoE's chief economist says a merely moderate rise in housing finance means consumer borrowing risks are contained. But unemployment is up in Scotland and northern England, where faster-growing personal loans matter more. Banks' pricing competition could worsen the reckoning.

ECB’s tough love is good for banks, bad for Italy

28 Dec 2016

The European Central Bank says Monte dei Paschi needs 9 bln euros of extra capital - up from 5 bln euros - after seeking state aid. Raising the bar is a prudent response to prolonged uncertainty. But it adds to Rome’s debt, and may push up the bailout bill for other banks.

Cheap CoCos keep Chinese banks dancing

20 Dec 2016

Smaller Chinese banks need to raise billions of dollars in loss-absorbing bonds. Having to raise regulatory capital is supposed to curb risky behaviour. But state support means mainland banks pay far less than European peers. That gives them little incentive to sober up.

EU bank forbearance trade may get another boost

14 Dec 2016

Europe's lenders may need 276 bln euros of new debt to shield taxpayers from bailouts, says a regional watchdog. The market might struggle to absorb the volume. However, most banks are yet to face hard deadlines. It’s another area where regulators might help out investors.

China bond market could use some foreign insight

9 Dec 2016

Regulators may allow foreign ratings agencies into the onshore market. That might comfort overseas investors enough to persuade index compilers to include Chinese bonds. The trick will be stimulating competition in a market twisted by government guarantees.

Renzi has time for one last gamble

8 Dec 2016

Despite resigning as Italy’s prime minister after losing a referendum, there’s a way back for Matteo Renzi: a quick election. That could pit him against the 5-Star Movement, which wants a vote on the euro. Renzi may still have enough support to win, but would need to move fast.

Greece turns from Sisyphus into Hercules

6 Dec 2016

Euro zone lenders agreed to rejig some of its debt, which adds to the likelihood that future financial support isn’t just good money thrown after bad. Greece is no longer pushing a rock up a hill, but some pretty hefty tasks still stand between it and economic recovery.

S&P’s sleight of hand is South Africa’s gain

2 Dec 2016

The credit ratings firm has downgraded the sub-Saharan state's local currency bonds but spared its foreign debt. This allows South Africa to escape junk status for the time being. Almost as important, there's no excuse now for firing respected finance minister Pravin Gordhan.

U.S. election resurrects Fannie, Freddie fiasco

22 Nov 2016

Shares of the two bailed-out mortgage agencies have rocketed on hopes the Trump administration might end government oversight. Big political roadblocks remain, though. Letting them keep any profit to prepare for the next crisis would be a simple and smart first step.

Credit markets ill-prepared for Trump presidency

21 Nov 2016

The U.S. president-elect may boost spending and growth. But higher interest rates would also push up funding costs for companies and emerging economies. Though credit investors have largely shrugged off Trump’s victory, the end of loose monetary policy could prove a shock.

MPS waves big carrot, fuzzy stick for debt swap

15 Nov 2016

The Italian bank needs to convert creditors' bonds into shares to make a 5-bln-euro capital increase work. It is offering better terms than expected, but keeping vague how many investors must agree. That makes sense given many bonds are held by retail, and the deal's complexity.

UK bonds offer scant recompense for messy politics

4 Nov 2016

Investors are keeping faith with Theresa May's government. Though sovereign yields have climbed in the past month, the shift is largely down to rising inflation expectations and fading hopes for lower interest rates. The relaxed stance leaves few buffers against political shocks.

China’s debt swap is a deal nobody wants

12 Oct 2016

China latest debt swap is a clever piece of balance sheet engineering. The government wants to swap corporate debt for equity without bailing out banks or borrowers. But unless the state forces deals through, there won't be much appetite from either side.

Venezuelan debt swap may ease coming pain

30 Sep 2016

State oil company PDVSA sweetened earlier terms and is now offering more bonds maturing in 2020 in exchange for $5.3 bln worth coming due next year. With crude prices rising, there's a glimmer of hope of postponing default. And investors would get a bigger claim once it comes.

Bold issuers test limits of yield-hungry market

29 Sep 2016

Bond investors, who only recently snapped up negative-yielding Sanofi and Henkel debt, shunned an aggressively-priced Lufthansa offering. IPOs too are showing signs that buyer power is returning and that desperation for yield hasn’t dulled asset managers' ability to scent risk.

China banks’ shadow addiction needs harsher remedy

2 Sep 2016

Recent curbs on lucrative shadow lending haven't done the job. Shadow loan portfolios at some smaller banks nearly doubled in the first half of this year. The $2 trillion business poses a growing threat to financial stability. Stronger medicine is needed.