Debt

Guest view: Real rates matter more than inversion

13 September 2018

An inverted U.S. yield curve, with short-term interest rates higher than long-term ones, is seen as a recession warning. Myron Scholes and Ash Alankar of Janus Henderson Investments argue that monetary policymakers should worry more about the excess of yields over inflation.

Bondholders face risky last bet at Casino owner

6 September 2018

Credit markets are growing increasingly nervous about Rallye, the indebted parent of the French grocer. Luckily, owner Jean-Charles Naouri can draw on bank lines to repay debt. But the more Rallye borrows from lenders, the fewer assets will be left if it eventually collapses.

Hadas: The paradox of risk-free finance

5 September 2018

A new study claims that national deposit insurance makes financial crises more likely. It may exaggerate, but guarantees are a sign of a basic problem in banking. The mix of public service and private risk is always potentially toxic. Separation would be hard but worthwhile.

Italy’s Trump card shows bond market fragility

24 August 2018

The U.S. President offered to buy Italian debt, according to one newspaper. Donald Trump may want to help a eurosceptic government but has limited scope to mitigate the damage that Rome’s policies are inflicting on domestic asset prices. Help is better sought closer to home.

Italy’s bond fix idea resembles covert bailout

21 August 2018

The economic spokesman of the ruling League Party says the euro will collapse unless the European Central Bank limits the gap between euro zone countries’ bond yields to 150 basis points. That bar is too low and would give big spenders free rein to dodge hard budget decisions.

Cox: When commemorating crises, think 20 not 10

15 August 2018

As the decennial anniversary of Lehman’s systemic collapse approaches, it’s worth recalling the one that preceded it. Russia’s 1998 default led to LTCM’s demise. Shockingly, that fiasco’s lessons went mostly unheeded until 2008. The key takeaway: there are always blind spots.

Turkey fated to pick worst of its bad options

10 August 2018

The lira fell over 10 percent to record lows against the dollar. The country’s options are narrowing: impose capital controls or seek IMF help. The latter will come with strings that will be unpalatable to President Tayyip Erdogan. Defiant self-sufficiency is more his style.

Foreign banks in Turkey face degrees of pain

10 August 2018

A growing economic crisis in Turkey has sent shares in European banks with significant local operations down by 3 to 4 percent. But the quantum of their exposure varies. Longer-term pain will depend on whether they matched loans with local deposits or relied on parent funding.

Casino shares go wrong way in risky debt punt

8 August 2018

The grocer’s shares fell 9 pct after an analyst flagged its related party deals. A sinking price may force its indebted parent to pledge stock to repay bonds, which could end up on the market. Investors have more to worry about than a grim outlook for French supermarkets.

Hadas: The Great Moderation is due for revival

2 August 2018

The 2008 financial crisis showed that economic cycles are still inevitable. Or did it? Duller expectations, tamer finance and stronger regulation could make periodic declines unnecessary. Sadly, it looks like at least one more downturn will be needed to get the message across.

Saudi’s Aramco plan B is too clever by half

27 July 2018

With the oil giant’s listing stalled, Riyadh wants to lever it up to buy a stake in chemicals group SABIC. It shouldn’t overburden Aramco, and offers a roundabout way of getting money to the state. But compared to an IPO it’s riskier, and does less to boost Saudi capital markets.

Bank of Japan’s trial balloon shot down on runway

23 July 2018

Bond yields and the yen rose after Reuters reported the central bank was debating whether to scale back monetary stimulus. The move would be good for bank investors. But the scale of the market reaction and economic reality will make it hard for Governor Haruhiko Kuroda to act.

HNA’s market thaw provides only cold comfort

20 July 2018

Three listed units of the troubled Chinese conglomerate lost a combined $1.5 bln in value after long trading halts ended. It signals a lack of confidence about HNA’s restructuring plans as it regroups without its late chairman. Pity investors trapped by a 10 pct downside limit.

Univision broadcasts a warning to today’s buyouts

11 July 2018

The Spanish language TV company is trying sell websites it bought two years ago. The Onion – no joke – was never a fit. Neither was a massive debt load imposed 11 years ago when five private owners bought it. With lenders now looser than ever, private equity risks painful reruns.

Malaysia taps brakes along China’s Belt and Road

5 July 2018

Prime Minister Mahathir Mohamad has suspended work on a $20 bln rail link between his country’s east and west coasts. It’s a rare setback for Beijing's massive infrastructure initiative. The project's importance, though, means Kuala Lumpur can afford to fight for a better deal.

Bank CoCos get a new reason to go pop

2 July 2018

Exchange-traded funds are pooling bonds that convert into equity in a crisis. It’s an odd mix: ETFs allow investors to buy or sell assets easily, while contingent convertibles can be hard to trade. The union may mean more investors for funky debt, but also bigger price moves.

Debt relief puts floor under Greek bank pains

28 June 2018

A government deal with creditors should lower funding costs for Greece’s big four lenders. With bad loans accounting for 48 percent of lending, normality remains a way off. But ending shareholder angst over debt sustainability could be the first step in banks’ rehabilitation.

Euro banks’ leverage games mock Basel playbook

25 June 2018

The Bank for International Settlements says European lenders flatter their leverage ratios by shrinking balance sheets just before reporting dates. It shows how global rules are weakened by uneven implementation. The danger is that banks’ profits are riskier than they look.

UK estate agents wounded by taxes and technology

25 June 2018

Britain’s largest real estate broker, Countrywide, has become the latest to warn earnings will fall as transactions dwindle. Higher taxes have hit amateur landlords while online property companies are squeezing fees. Given high fixed costs, agents will struggle to plug the gap.

Greece swaps bailout hell for eternal purgatory

22 June 2018

Eight years after seeking financial help Athens can at last support itself, helped by extra euro zone funds and debt relief. But borrowings of over 300 bln euros mean it must maintain a tight budget, and submit to regular scrutiny. Doubts over its debt sustainability will linger.