Treasury’s Puerto Rico superbond looks half baked 15 Oct 2015 The U.S. territory and the federal government have discussed swapping some of the island’s $72 bln debt for a new bond paid from a Treasury-run kitty. The idea is politically fraught and may not work. It’s a poor substitute for a financial control board or Chapter 9 bankruptcy.
Euro zone rediscovers sloppy fiscal policy 15 Oct 2015 Deficits are creeping up in Spain, Italy and even growth star Ireland. Reasons include easy money and pre-election spending. As yet, the gaps aren’t dangerously big. What’s more worrying is poor spending decisions, slowing reforms and fiscal dissonance between member states.
Renzi shrinks Italy’s political risk premium 14 Oct 2015 Prime Minister Matteo Renzi achieved an important step in his plan to reform Italy’s upper house. That should mean more stable governments. Italy’s bond yields are already close to pre-crisis levels. Narrowing the discount to France or Germany requires further economic reform.
Senator’s Fannie Mae short tip had better pay off 8 Oct 2015 Bob Corker, a critic of the mortgage finance firm and its sibling, offered the highly unusual investment advice in a TV interview. Hedge funds want to keep Fannie and Freddie Mac alive, while Corker wants Congress to enact belated reforms. Sadly, his proposed bet is no certainty.
Spain’s Big Oil beast has balance sheet work to do 2 Oct 2015 Repsol’s balance sheet looks stretched. It’s good it has exceeded its $1 bln asset sale target but the $13 bln Talisman deal leaves a burden. It will struggle to finance capex and dividends in a $50- $60 oil environment. It needs a game plan for its forthcoming strategy day.
Emerging market debtor crisis likely and needless 1 Oct 2015 An IMF study shows that emerging market borrowers have taken full advantage of stimulative post-crisis monetary policy. Higher rates are set to bring more defaults and a liquidity squeeze. Such woes could be avoided easily, if companies and investors turned away from debt to equity.
Review: A human face for the foreclosure fiasco 25 Sep 2015 Seven years on and the financial crisis blame game is still alive and well. In his new film, “99 Homes,” Ramin Bahrani crafts a dramatic narrative that does the best job yet of capturing the complexity of assigning accountability to the collective U.S. housing delusion.
China dumping fortifies Thai steelmaker debt woes 22 Sep 2015 Dumping by China has pushed struggling Sahaviriya over the edge: Thailand’s biggest steelmaker is in talks to restructure $1.4 bln of debt. As rival Tata Steel has found, buyers for high-cost European producers are scarce. That suggests SSI’s creditors will have to take the pain.
Chicago’s lack of crisis makes fiscal rehab harder 21 Sep 2015 Mayor Rahm Emanuel wants a big property tax hike to shore up underfunded pensions. It’s an important move to get the city out of a $40 bln hole. Perversely, without lenders freaking out, as happened to New York in the 1970s and Detroit more recently, the job is actually harder.
Croatia takes EU bank political risk to new level 21 Sep 2015 The EU’s newest member has voted to hit lenders with the cost of switching citizens’ Swiss franc-denominated loans to euros. That’s tougher than similar Hungarian and Polish conversions, and the legal and social grounds are weak. As the ECB has warned, foreign investors may flee.
American Dream wakes amid home rental deal signs 21 Sep 2015 The merger of Starwood Waypoint and Colony American to create a company with $8 bln of homes suggests U.S. rentals will keep thriving. Cost savings will add financial strength as youngsters take baby steps into the housing market. Ownership prospects are on the rise, too, though.
German sovereign bail-ins work in alternate world 11 Sep 2015 Finance Minister Wolfgang Schaeuble wants automatic extensions in state bailouts, as a riposte to proposals for common bank insurance. It’s a logical plan. Yet given it looks hard to implement and could undermine fragile euro zone stability, it’s more of a delaying tactic.
Moving millennials may unpack $600 bln punch 9 Sep 2015 Despite better job prospects, many young Americans are living longer with their parents. That curbs spending on housing, as well as on internet service, refrigerators and such. A Breakingviews analysis suggests millennials exiting attics could add 4 pct to GDP within a few years.
Renzi turns reform steamroller to Brussels 8 Sep 2015 Italy’s prime minister, dubbed “the scrapper”, is promising tax cuts. It looks like a challenge to Europe’s fiscal rules. Yet lower corporation taxes are needed, and the ECB will probably keep markets calm. The flipside is that Matteo Renzi’s plan requires that mooted spending cuts actually happen.
Italy rushes through one last flawed bank bailout 7 Sep 2015 Europe is weeks away from a new regime that makes creditors and depositors pay for bank rescues. Yet Rome is still asking Italian banks to pony up 1.4 billion euros to save three small lenders. Bail-ins are unpredictable, but the proposed solution risks leaving the system weaker.
American Express may face its Microsoft moment 4 Sep 2015 The $75 bln credit-card firm led by Ken Chenault is ValueAct’s latest target. It’s not clear how breaking up or returning capital will remedy Amex’s subpar growth and lagging stock. Going after the long-serving boss, ValueAct’s successful strategy at the software giant, might.
Bondholders escape Ukraine with only mild scratch 27 Aug 2015 War-torn Ukraine has agreed a 20 percent haircut with a group of rebellious creditors. That’s half the loss Kiev originally wanted. Yet it’s not much of a victory for lenders either: with the economy in tatters and doubts continuing, creditors will be lucky to escape another hit.
Investors struggle to find true safe havens 26 Aug 2015 Boltholes like U.S. and German bonds or the Swiss franc are benefiting less than might be expected amid equity swings and concern over a slowing China. Investors are rightly wary of once-safe assets that have moved erratically of late. The mystery is where they are going instead.
Yellen may relish opportunity not to communicate 25 Aug 2015 The Fed chair is skipping central bankers’ annual shindig in Jackson Hole this week. For all her institution’s professions of transparency, recent global market ructions mean nothing she might have said would have satisfied anyone. Better to wait until the FOMC meets next month.
Credit doomsayers offer confusion not foresight 24 Aug 2015 Investors were selling corporate bonds before the latest global stock market slide. That could be an echo of the 2008 financial crisis, when equities ignored warnings in credit markets. The message, though, is mixed. Credit pros aren’t reliably prescient Cassandras.