Banks’ buyout-debt machine defies quick jumpstart 8 Dec 2022 SocGen, BNP and Deutsche are buying slices of their own European collateralised loan obligations, which turn private-equity loans into bonds. That has echoes of 2008-style excess, but it’s not too risky. Their bigger problem is that the $1 trln market may be inexorably slowing.
Capital Calls: Funky debt shock 29 Nov 2022 Concise views on global finance: Germany property group Aroundtown won’t be the last to flout bond market convention on hybrid debt.
Capital Calls: ABB, Italian budget 21 Nov 2022 Concise views on global finance: The $57 bln Swiss engineering group is selling a minority stake in its car charging unit, as a fallback to volatile IPO markets; premier Giorgia Meloni’s hard-right government targets a budget deficit of 4.5% of GDP in 2023.
UK market watchdogs rely on kindness of foreigners 9 Nov 2022 The Bank of England has intervened in government bond trading twice in less than three years. Both times, selling by overseas funds was partly to blame. British regulators have limited oversight of the $2.4 trln gilts market. Their best hope is help from counterparts elsewhere.
Risky debt selloff has much further to run 28 Oct 2022 Investors are dumping corporate bonds as interest rates rise. Relatively safe investment grade securities have fallen harder than those issued by junk-rated borrowers, which hit $650 bln last year. That will reverse as high-yield debt starts pricing in defaults and a recession.
The urgent search for the perfect inflation hedge 20 Oct 2022 Nearly every major asset class has lost money this year, leaving investors scrambling to protect their wealth from rising prices. Traditional alternatives such as gold and property also have drawbacks, writes Edward Chancellor. The best shield may be the most obvious one.
Sovereign debt greens yet net-zero pledges darken 13 Oct 2022 Saudi Arabia’s wealth fund is the latest public body to issue securities to fund renewable assets. Strong buyer demand and the chance to flaunt action on climate change explain the boom. Yet national decarbonisation targets remain weak, and green bonds do little to improve them.
Credit Suisse’s debt move is largely reassuring 7 Oct 2022 The lender is buying back $3 bln of bonds, a way to remind credit markets of its cash mountain. Having to reassure on liquidity is hardly ideal, but Credit Suisse’s cost of insuring against default fell. For shareholders, it also flags the bank has creative ways to boost capital.
Interest rate delusion may be biggest error of all 6 Oct 2022 Bear markets occur when a previously dominant idea is proven wrong. The current selloff in bonds and stocks reflects the mistaken belief that the cost of money would stay low. For investors, the full consequences of that colossal mistake are unknowable, says Edward Chancellor.
Pension fund blowup faces brutal second act 6 Oct 2022 The Bank of England’s $74 bln bond-buying scheme saved retirement plans from losses on government bonds. But the fallout from the crisis means funds with $1.9 trln of assets now need to reduce risk by selling corporate bonds and other esoteric assets. That will spread the pain.
UK mess bolsters case for Italian budget prudence 6 Oct 2022 Market turmoil forced British Prime Minister Liz Truss to partly ditch unfunded tax cuts. The humbling saga should help Italian would-be premier Giorgia Meloni resist her allies’ spending requests. Picking a technocrat as finance minister would give investors further comfort.
Capital Calls: Buffett’s Berkshire successor 4 Oct 2022 Concise views on global finance: The Omaha oracle owns $100 bln of stock in his conglomerate. His potential successor Greg Abel’s purchase of $68 mln of stock last week – after selling shares in a subsidiary for $870 mln in June – is too small a move toward Buffett’s standard.
Tax U-turn leaves UK’s Truss with credibility gap 3 Oct 2022 Prime Minister Liz Truss’ move to scrap a tax cut for high earners lowered government bond yields and boosted the pound. But her policies still rely on unfunded giveaways and rosy growth hopes. Investors’ loss of confidence from the crisis makes her agenda even harder to achieve.
“Help to Refi” could be UK’s next financial wheeze 30 Sep 2022 Prime Minister Liz Truss’s rash tax cuts have rattled the government bond market. She needs to attract investors and bring yields back down. The “Help to Buy” scheme to subsidise mortgages offers a template. Breakingviews imagines a fictional adviser taking up the challenge.
BoE remedy can only be partial cure for UK ills 29 Sep 2022 The UK central bank launched $70 bln of bond-buying after PM Liz Truss’s budget triggered market chaos. That has stemmed a financial crisis among indebted pension funds. Stopping the market exerting economic pain requires a fiscal rethink from politicians, not more BoE action.
BoE’s bond-buying U-turn is worth the risk 28 Sep 2022 The Bank of England will buy UK sovereign debt and delayed sales of its $915 bln bond portfolio due to market “dysfunction”. The danger is Governor Andrew Bailey looks too close to the government whose tax cuts caused the turmoil. Yet calmer markets make it easier to hike rates.
Investors strangle UK’s pro-growth budget at birth 26 Sep 2022 Government bond yields soared and the pound slumped following Chancellor Kwasi Kwarteng’s 45 bln pound tax cut package. Higher interest rates will depress demand while costlier energy imports will further weaken the public finances. That risks cancelling out any boost to growth.
Italy’s right-wing winners inherit poison chalice 26 Sep 2022 Nationalist Giorgia Meloni, EU-sceptic Matteo Salvini and convicted former PM Silvio Berlusconi scored an election victory. Despite campaign unity, they disagree on sanctions and spending. The rivalries risk undermining the high-debt nation’s ability to tackle its energy crisis.
India’s bond inclusion will be overdue and timely 26 Sep 2022 The sovereign debt of the world’s fifth-largest economy may be added to JPMorgan’s emerging market index, offsetting Russia’s exclusion. It’s a step towards prising open a $1 trln market, and a feather in India’s cap. But there are reasons it took so long.
Italy’s first female leader, Amazon’s monopoly 22 Sep 2022 Far-right leader Giorgia Meloni is favourite to become prime minister after Sunday’s election. In this Viewsroom podcast, Breakingviews columnists debate how she will handle Rome’s debt, which is expected to reach 148% of GDP. And: the online retail giant’s antitrust battle.