Capital Calls: Russian default, Inflation and debt 27 Jun 2022 Concise views on global finance: Moscow defaulted on its foreign debt for the first time in over 100 years, leaving bondholders in limbo; the Bank for International Settlements wants rates raised “quickly and decisively”, but is also worried about higher borrowing costs.
Investors need to learn to ride inflation cycle 23 Jun 2022 Bonds and shares are tumbling as prices soar, just as in the 1970s. The experience of that decade suggests value stocks, commodities and safe-haven currencies offer the best protection, says Edward Chancellor. But wild swings in inflation can still catch markets off-guard.
Lagarde will struggle to do a Mario Draghi 21 Jun 2022 Euro zone bond markets have stabilised since the ECB president pledged to buy bonds. That raises the chance that investors cowed by her Italian predecessor’s promises won’t need her to intervene much. Just as well, given interest rates and political risks make it harder to do.
ECB’s crisis weapon pledge is vague and late 15 Jun 2022 The European Central Bank will “accelerate” work on a new tool to control soaring bond yields from weak sovereigns. The lack of detail reflects divisions within the bank on when and how to use such a programme. It’s an invitation to markets to test the ECB’s resolve yet again.
Central banks still have space to fight inflation 15 Jun 2022 Jerome Powell and Christine Lagarde are tightening monetary policy to try to control soaring prices. Previous shocks have prompted the Fed and ECB chiefs to pause or loosen again. Despite plunging equity prices this time, calmer credit markets imply the “Fed Put” is far off.
Crashing yen disturbs Haruhiko Kuroda’s zen 15 Jun 2022 Japan’s currency is at its weakest against the U.S. dollar since 1998 and bond traders are revolting. It disrupts the central bank governor’s meditations on the mystical balance between growth, public debt and near-zero rates. Stagflation risk suggests a new mantra is warranted.
Italian banks face return of sovereign embrace 14 Jun 2022 A decade ago, soaring government bond yields threatened to drag down domestic lenders. Today, banks have shrunk state debt to less than 7% of total assets, while cutting dud loans and building capital buffers. As the ECB retreats, the pressure to load up again will increase.
ECB’s farewell to QE may prove premature 8 Jun 2022 The European Central Bank may on Thursday confirm plans to end its 3 trln euro asset purchase programme and raise rates in July. Weaker economies’ borrowing costs are already soaring. A mere hint that bond-buying could resume if yields jump may not be enough to keep markets calm.
Chinese property crisis drives derivative rethink 7 Jun 2022 Beijing has helped some private developers with bond issues by letting them offer protection via tools like credit risk mitigation warrants. So far it’s symbolic and over-reliant on reluctant state banks. If private money can be wooed, however, the market could finally take off.
China’s real estate renovation is too cosmetic 26 May 2022 The central bank joined wider efforts to help the property sector by cutting five-year lending rates to 4.45%. Banks remain sceptical of developers however, and bonds are trading at distressed prices. Lack of faith in the industry’s foundations make it harder to build a recovery.
Russia plays the fool in its own default theatre 3 May 2022 Moscow looks set to meet foreign currency bond payments, after saying a month ago it could only pay in roubles. High oil and gas prices mean it has ample revenue to meet its obligations. But the debt grandstanding may not yet be over, notably if the EU imposes an energy embargo.
UK grocer buyout creates bond market indigestion 29 Apr 2022 Banks led by Goldman and BNP Paribas that funded CD&R’s $9 bln Morrisons buyout have sold a chunk of the debt at a big discount. Inflation and a supermarket price war mean bondholders can now name their price. The debt hangover may make other deals trickier.
China takes new tack on emerging market debt 27 Apr 2022 Beijing has agreed to work with the Paris Club of official creditors to clear up Zambia’s $17.3 bln debt mess. That’s a major shift from the bilateral approach it usually adopts. An even bigger sign of progress would be accepting a haircut on the $5.8 bln that China is owed.
Draghi’s bond-buying triumph lacks obvious sequel 13 Apr 2022 The ECB’s plans to tighten monetary policy and the Ukraine war revive fears that weak euro zone members’ borrowing costs will soar. Though the former central bank boss tamed debt spreads in 2012, a repeat is tricky. Besides, governments that struggle can use tools Draghi devised.
Where odd U.S. yields lead, Europe will follow 30 Mar 2022 Two-year U.S. Treasuries briefly yielded more than 10-year ones. There’s some way to go before such an inversion happens in the euro zone. But high inflation pushed German two-year bond yields into positive territory for the first time since 2014. A replay may be on the cards.
Bank of Japan stumbles into defensive minefield 29 Mar 2022 War, Covid-19 and an aggressive-looking Fed are conspiring against Governor Kuroda’s ultra-loose policy. The yen is plunging and government bond yields are up despite BOJ efforts. There’s no easy solution, but doing nothing is risky too.
Russia kicks default drama into future 17 Mar 2022 Moscow says it sent $117 mln due in bond interest payments. While sanctions made the decision painful, not paying its dues or offering roubles instead of dollars would have meant years of legal disputes and made the economy even more dependent on oil. That may still happen.
Refugee bonds can keep humanitarian corridors open 11 Mar 2022 Europe says 7 mln Ukrainians may flee Russia’s invasion. The 2015 refugee crisis showed migrants can boost workforces and economies. But integrating new arrivals is expensive. Impact bonds can pay for the upfront resettlement burden, limiting quarrels between host nations.
Russian debt coin toss will get harder to call 8 Mar 2022 Gazprom and Rosneft are repaying bonds despite fears Moscow may renege on its own debt. The depressed prices of Russian corporate debt mean investors who rightly bet on repayment can double their money. Yet rising tensions and murky workouts mean the trade will get riskier.
Yandex bond woes are first step to state takeover 7 Mar 2022 The U.S.-listed Russian tech group may default on a $1.25 bln debt. Even if it cuts a deal with creditors, the economic hit from sanctions will crush its revenue from e-commerce and selling ads. President Vladimir Putin’s internet goals make eventual nationalisation likely.