Money-market funds feel stimulus ripple effect 3 Apr 2020 Some Fidelity funds turned away investors for fear that yields on the products could turn negative. It’s not the same as a dreaded breaking-the-buck moment, but is still a headache. Massive issuance of new Treasuries should help, but it’s another case of unintended consequences.
Corona Capital: Banking bonuses, Local TV M&A 30 Mar 2020 Concise views on the pandemic’s corporate and financial fallout: BBVA’s ditched bonuses pressure peers; local TV deal has more than one struggle.
Why 150% is the new 100% for public debt/GDP 26 Mar 2020 Governments are splurging to fight the economic havoc wrought by the coronavirus. For example, France’s debt will exceed its annual output by the end of 2020. Investors may not mind as much as before: Every country is affected, and central banks are the backstops.
Virus gives Africa a good debt default excuse 23 Mar 2020 The continent faces Covid-19 largely on its own as other countries strain to help their own citizens. A young population helps; weak health systems and stretched public finance don’t. Cash-strapped countries like Zambia and Ghana may stop paying what they owe bondholders.
Britain’s mega-bailout is just a good start 18 Mar 2020 Finance minister Rishi Sunak promised 350 bln pounds in loan guarantees and support for stricken businesses. Though details are slim, the package worth 17% of GDP is suitably large. The next step is to get cash directly to those who need it most. Until then, fear will dominate.
Lebanon faces long road to default exit 9 Mar 2020 The debt-burdened country is set to miss a debt payment due on Monday, a first-time default. The debt’s outdated fine print could give creditors leeway to reject stiff haircuts. But Lebanon could also dust off an old tool in its defense. It’s likely to be a long grind.
Lebanon gives Lazard bankers a brainteaser 28 Feb 2020 The debt-strapped nation has selected the firm to advise on a restructuring. But principal haircuts could imperil local banks, austerity would upset ordinary Lebanese, and Hezbollah’s growing power complicates everything. Lazard will be worth its fees if it can solve the puzzle.
Puerto Rico’s $24 bln debt cut won’t be its last 11 Feb 2020 Bondholders are taking a 69% hit in a deal with the federally appointed oversight board to restructure the U.S. territory’s finances. But the plan is based on overly rosy expectations about the island’s prospects. Even reduced, Puerto Rico’s debt looks unsustainable.
Review: Greek crisis drama shows EU’s good and bad 10 Jan 2020 “The Last Bluff” tells how politicians and bureaucrats negotiated and bullied Alexis Tsipras, Greece’s prime minister, into submission in 2015. The book captures the strange excitement of complex negotiations, and the enduring appeal of the powerful but flawed European vision.
Hadas: Fiscal deficits are A-OK after all 8 Jan 2020 It turns out economists can learn from experience. Decades of disinflation and years of extreme monetary policy have reversed the conventional wariness of government borrowing. The new pro-deficit thinking could moderate the next recession, but then rekindle unwanted inflation.
Argentina debt do-over is even chancier than usual 3 Jan 2020 The country will need to restructure at least $100 bln of its borrowings, not just tweak terms as the Fernandez government favors. The novel features attached to Argentine debt after its last default may bring unexpected twists. The results will shape future sovereign debt deals.
Argentine handover is chance for IMF LatAm rebrand 10 Dec 2019 The unloved lender, $45 bln on the hook, now has to deal with new President Alberto Fernandez and his austerity-critic economy minister, Martin Guzman. The IMF needs a reboot across the region. Accepting political realities and updating failed prescriptions would be a good start.
South Africa heads for year of living dangerously 29 Nov 2019 Surging debt payments are squeezing public spending. President Cyril Ramaphosa will try to shrink bloated state firms like power utility Eskom, triggering ugly showdowns with unions that may hit the economy. Failure to face them down would douse reform hopes and hurt even more.
South Africa boozes in last chance debt saloon 12 Nov 2019 A ballooning deficit, dismal growth and unprofitable state firms are putting the Rainbow Nation’s debt on an unsustainable course. Low external borrowing makes a currency crisis unlikely. But a dependence on local bond markets can only delay the reckoning.
UK gilts’ odd stability is precarious 6 Nov 2019 Britain’s main political parties are in a bidding war to woo voters before an election. Yet UK debt yields are steady. Hopes of more Bank of England easing is one reason. Bond vigilantes will wake up if a smooth Brexit opens the way for rate rises and government spending surges.
Nigeria is right to fight $9 bln arbitration claim 25 Sep 2019 The African nation is refusing to honour a ruling by UK-based judges on a failed gas project. Abuja is on thin ice because it failed to appeal on time. But the contract awarded to a little-known Irish firm looks suspect. Reopening the case would be a victory for common sense.
Hadas: The trillion-dollar lesson on fiscal policy 18 Sep 2019 Donald Trump’s tax cuts will lead Washington to borrow nearly $1 trln, or 4.5% of GDP, this year. The politics of deficits are controversial, but the monetary economics shouldn’t be. While large deficits can cause inflation or constrain growth, today’s shortfalls may do neither.
Spain turns Italian as economic fault lines widen 18 Sep 2019 The fourth election in four years follows Prime Minister Pedro Sanchez’s failure to form a government. Unlike in Italy, bond investors have shrugged off Spain’s dysfunctional politics. But gridlock has left debt high as growth dips, while the Catalan question remains unsolved.
Door cracks open on U.S. housing reform 5 Sep 2019 Treasury officials want to get Fannie Mae and Freddie Mac out of their post-crisis limbo and allow them to retain more capital. Their new plan has merit in that it doesn’t entirely hinge on a dithering Congress, and gives them a better chance of enduring the next downturn.
Italy’s budget is chance to reset EU relations 4 Sep 2019 The first test for Prime Minister Giuseppe Conte is to get his new administration’s sums to add up. Though debt is still rising, tightening spending while the economy weakens risks fuelling deeper anti-EU sentiment. Brussels should give the new government some flexibility.