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.
Prioritizing U.S. debt could stamp out market risk 19 Apr 2013 Drama over the cap on Uncle Sam’s borrowing power rattled investors back in 2011. A new proposal would force Treasury to pay bondholders before contractors and seniors. If the debt limit can’t just be scrapped, at least markets could be spared some of Washington’s dysfunction.
Conviction beats evidence in policy: the proof 17 Apr 2013 Advocates of small deficits have long relied on a seminal paper by Harvard economists Carmen Reinhart and Ken Rogoff. New research shows it’s full of holes. Stimulus enthusiasts may gloat, but they too put conviction before facts. That’s inevitable. Useful facts are hard to find.
Argentina may finally be picking up some toys 27 Mar 2013 The country’s government has thrown many from the pram in its fight to avoid paying anything to bondholders unhappy with a default settlement. Now ministers seem to be considering paying with new securities. It might not win over holdouts yet. But it’s an encouraging sign.
Italy illustrates reward, and cost, of austerity 21 Mar 2013 Rome raised its deficit target for the next two years. It’s a belated realisation of austerity-induced recession, and a reward from Brussels for towing the line. A country with no government and rising debt might spook markets, but Mario Draghi has sedated the bond vigilantes.
Ireland shows powers of virtual ECB 14 Mar 2013 Dublin has sold the first 10-year bonds since its bailout. The move helps it qualify for controversial ECB bond buying - and shows it doesn’t need it. Mario Draghi’s virtual intervention is working wonders. The euro crisis goes on.
China’s solar bonds leave dim hope of payback 13 Mar 2013 On financial grounds, the looming default of panel-maker Suntech should leave foreign creditors with nothing. Solar overcapacity is rampant and the bonds’ terms are weak. What value remains is a risky bet that authorities will deem offshore investors too useful to snub outright.
Aging drives U.S. debt more than medical costs 11 Mar 2013 Much Washington talk focuses on runaway healthcare spending. But that has been slowing. Over the long term, say 25 years, the number of people needing treatment is the federal government’s biggest problem. Not far behind is the cost of interest as borrowing balloons.
Hugo Dixon: Markets too sanguine about Italy 11 Mar 2013 The country’s politics and the economics are both messed up - and there are no easy solutions. While Rome does have the ECB as a backstop, it may have to get to the brink before using it.
Hungary’s budding market success may not last 6 Mar 2013 Investors seem hungry for Hungary. Last month Budapest raised funds from the market for the first time since 2011, luring buyers with high returns and improved finances. But the government’s erratic agenda ahead of a 2014 election could curb future appetite for the country’s debt.
Brewing Latam defaults could prompt 1980s re-run 5 Mar 2013 Argentina may stop all debt payments to avoid paying holdout creditors from its last default 11 years ago, and Venezuela’s credit looks shaky. The danger is that one failure to pay sparks others in the region, and even virtuous borrowers like Colombia are cut off from credit.
Corporate hybrid boom retreads bank capital fiasco 25 Feb 2013 Corporate hybrids, securities that blend debt and equity, are booming. They give companies tax-efficient cheap capital, and investors yield. But the more the market grows, the greater the fallout if issuers, like banks during the last crisis, actually use their equity features.
Welcome back, CLOs 21 Feb 2013 Sales of new collateralised loan obligations are taking off in Europe for the first time since the financial crisis. These packages of high-yield debt were a major culprit behind the last credit bubble. But this time round, lower leverage has made CLOs safer. They even have a useful role to play in refinancing.
U.S. debit-card deal recalls value of subprime 20 Feb 2013 Since the crisis, borrowers with middling to poor credit have been all but abandoned by mainstream lenders. Yet the $1.1 bln sale of prepaid card provider NetSpend, which caters to them, values the company at 17.5 times expected earnings. It’s a sweet spot that now eludes banks.
China’s next debt crisis will be a local affair 20 Feb 2013 Elaborate ties between local governments, lenders, companies and guarantee firms mean that the big risks may not lie in the country’s big banks, but in towns and regions. A recent suggestion of setting up local bailout funds sounds sensible. But contagion will be hard to avoid.
Vietnam floats a lifeboat for foreign creditors 8 Feb 2013 The government has helped end a two-year standoff between bankrupt shipbuilder Vinashin and overseas lenders by guaranteeing a new $620 million bond. That will aid the country’s capital market rehabilitation. But the victims of other shipwrecks shouldn’t count on similar rescues.
ECB delivers long-overdue Irish relief 7 Feb 2013 The European Central Bank has given the nod to the restructuring of Ireland’s bank bailout, which will make the country’s debt more bearable. Euro zone leaders had resisted allowing their bailout fund to take on the burden. Luckily the ECB is stepping in when governments fail.