Debt

Greece needs a new debt deal

1 Aug 2013

Last year’s restructuring left Athens with a Sisyphean debt burden. The euro zone’s current policy of dangling modest relief in exchange for good behaviour won’t work for ever. Debt is stifling the economy and making austerity untenable. Greece needs more debt relief, without delay.

Detroit bankruptcy has lesson for euro zone

19 Jul 2013

A regional government without its own currency gives up in the face of intractable financial problems. But unlike the euro zone, no one is worrying that Motown’s mess will damage the dollar. Euro zone members have more bank issues, but their pain can also be contained.

Euro zone weakened by banks’ sovereign-debt feast

16 Jul 2013

Peripheral bonds seem impervious to rating cuts or political crises, because debt is being increasingly swallowed up by domestic banks and investors. That stifles lending, discourages reform and delays the euro zone’s recovery. The ECB could help - but only up to a point.

How to cut the cord on China’s shadow banks

3 Jul 2013

The explosion in non-bank credit is helpful, so long as it doesn’t bounce back on regular lenders. Ringfencing the risks requires banks to stop using cheap funding to lend off balance sheet. Savers also need to learn that investing in high-return products is no free lunch.

Student loan rate hike is a D.C. dysfunction bonus

1 Jul 2013

Congressional inaction means Uncle Sam-backed college borrowing costs double to 6.8 pct. That should curb the rapid rise of such debt, now at nearly $1 trln. It might even slow education inflation. It’s a rare case of useful policy that doesn’t require waiting for the Fed.

Home equity help is better route to U.S. ownership

21 Jun 2013

The Federal Housing Administration is in a $16 bln hole thanks to a failed model of encouraging home-buying by allowing tiny down payments. A new proposal to match buyers’ savings to create a bigger slug of equity looks like a less risky way to subsidize the American Dream.

U.S. Supreme Court not so classy on class actions

20 Jun 2013

The top court barred retailers from banding together to sue American Express on antitrust grounds. The jurists seem to pick cases that make it easy to quash class actions and promote private arbitration. The effect is to erode legal rights – and perhaps the court’s credibility.

Europe tries to skirt both chaos and complacency

13 Jun 2013

Governments struggle to make tough choices when markets are forgiving. Rising yields on risk-free debt, and the German constitutional court’s unpicking of the ECB’s bond buying, herald a tougher ride for peripheral bond markets, and less chance for governments to rest easy.

Higher yields, the next great financial threat

7 Jun 2013

Government bond markets have recently calmed down. Central banks, politicians, and bankers - in short, everyone but savers and investors - hope that the May rise in yields was not the beginning of a trend. The world is just not ready for what used to be considered normal yields.

Asian tycoons give LBOs an eastern twist

5 Jun 2013

Shuanghui’s takeover of U.S. pork group Smithfield combines hefty leverage and limited cost savings. Recent deals in Thailand and Singapore have also been quasi-buyouts. As long as local banks remain flush, Asian groups will give private equity firms a run for their money.

Rumors of credit bubble only partially exaggerated

28 May 2013

Some risky forms of debt have made a dramatic comeback, but few investors seem panicked that another credit crisis is about to erupt. Breakingviews offers its own bubble-meter for the credit market. The reading: frothy, but not yet in the danger zone.

Blame Japan’s debt on companies, not the state

23 May 2013

Perennial budget deficits have helped to offset corporate deleveraging. That explains why public debt is so high. If Prime Minister Abe’s policies revive private investment, the government’s track record suggests it will tighten its belt by raising taxes. Tokyo won’t go bust.

Did Brazil miss a trick on Petrobras bond sale?

17 May 2013

President Dilma Rousseff uses the oil giant for many nationalistic purposes, though strengthening domestic capital markets isn’t apparently one. Issuing a slice of this week’s $11 bln bond offering in reais, though costly, would at least have been a better sort of meddling.

Greece’s vicious circle may be turning virtuous

15 May 2013

Yields on Greek 10-year bonds hit their lowest level in nearly three years. Investors are returning now that fears of a euro zone exit have receded and the country’s finances and politics look more stable. The economy is still in trouble, but it’s moving in the right direction.

Japan’s yield spike is no canary in the debt mine

15 May 2013

Rising economic optimism has prompted a drop in government bond prices. Yet the cost of insuring against Japanese default remains low. Even if the country’s fabled Mrs Watanabes trim their holdings, the central bank’s bond-buying will keep Japan’s borrowing costs under control.

Millennial generation may drag down U.S. growth

13 May 2013

The youngest crop of American adults is showing some tendencies that could prolong stagnation. Their bloated education debt is a headwind to prosperity, and they have weaker earning power and lower fertility than their elders. That’ll make tackling deficits tougher.

Greece offers value in distorted low-rate world

13 May 2013

German Finance Minister Wolfgang Schaeuble worries that loose monetary policy is distorting markets. That doesn’t show for Greece, whose bonds still pay a hefty yield even after risks of a euro exit have receded. Athens remains an outlier in the peripheral dash for trash.

BBVA’s hybrid hit is bet on health of Spanish bull

1 May 2013

A bank from a debt-challenged country was first to issue a new breed of loss-absorbing bonds. Central bank-whipped bondholders shrugging off the euro zone crisis are desperate for yield. A 9 percent coupon looks juicy, but pays investors less than equity, with no upside.

Cyprus punishes the Russians and the prudent

25 Apr 2013

Nicosia wants to shield domestic depositors in the banks where uninsured savings will be haircut. The levy will only hit after loans have been deducted. Foreign customers - mostly Russian - will be penalised. That will also hurt those Cypriots who chose to stay frugal.

Edward Hadas: Debt debate in need of upgrade

24 Apr 2013

The 90 percent debt-to-GDP threshold has been debunked, but the Rogoff-Reinhart thesis should never have gained any traction. An ideological conviction that governments distort economies encouraged weak thinking. Pro-stimulus arguments are equally fervent, and no more convincing.