China can afford to shrug off credit downgrades 21 Sep 2017 S&P just dinged the sovereign rating. Banks have been marked down too. Worries about rising debt are justified, but the market’s non-reaction shows how differently China’s economy is wired. State control and plentiful savings mean Beijing will escape most of the usual fallout.
What Carney can learn from Yellen 21 Sep 2017 Fed Chair Janet Yellen showed rate-setters can shock markets even when they stick to the script. That’s a lesson for the Bank of England’s Mark Carney, who has talked up a rate rise this year. Like her, he may have to hike without having solved a host of economic puzzles.
Breakdown: Colour-coding Germany’s election 18 Sep 2017 GroKo, black-green or Jamaica? Angela Merkel is almost certain to win a fourth term, but the race to be her partner is wide open. The outcome matters for Germany – and for Europe. Breakingviews decodes the colourful jargon, and looks at the consequences of different outcomes.
Saudi reform rethink points to Aramco IPO risks 7 Sep 2017 The kingdom may water down plans to overhaul the economy. That could have implications for the partial privatisation of Riyadh’s most prized asset. If much-vaunted reforms can be delayed, so can a problematic sale that is unlikely to deliver the desired $100 bln windfall.
5-Star’s softer stance on euro is clever tactic 4 Sep 2017 The radical Italian party sees a referendum on euro membership as a last resort, one of its top lawmakers says. The apparent U-turn could help soothe markets and business before upcoming elections. There’s room to backtrack, but 5-Star is holding up and getting more nuanced.
Trump may unite Congress – against him 31 Aug 2017 The U.S. runs out of money in a month and the president is attacking lawmakers in his own party. That could prompt Republicans and Democrats to work together to keep the lights on. Plus: Rupert Murdoch could be overpaying for Sky.
ECB weakens Italy doom loop by bending bond rules 16 Aug 2017 The European Central Bank is buying more Italian bonds than its rules allow. That helps lower the country’s borrowing costs and allows its banks to cut exposure to their sovereign. With elections and political risks looming, it may have to take an ever more pragmatic approach.
EU play for primary dealers may speed their demise 26 Jul 2017 Banks that buy EU debt directly from governments might have to move jobs out of London after Brexit to retain the privilege, Reuters reports. Such strong-arm tactics may drive some out of a business that has already grown less appealing and force a rethink of how bonds are sold.
Central banks have no choice but to keep the faith 20 Jul 2017 ECB chief Mario Draghi and Bank of Japan boss Haruhiko Kuroda have spent trillions of euros and yen without generating much inflation. Nor is it clear when a pick-up in growth will feed through into prices. Yet they are obliged to insist their policies will work eventually.
Cool credit markets could be own undoing 10 Jul 2017 Corporate bonds shrugged off the recent “taper tantrum” that hit government debt and equities. Investors may be betting that central banks will only slowly tighten policy, supporting demand for riskier assets. Yet unruffled markets may only hasten policymakers’ rush for the exit.
Bank of Japan can hold out as Western yields rise 7 Jul 2017 The central bank underlined its determination to keep 10-year yields close to zero by offering to buy unlimited bonds. The BOJ has the tools, market dominance and motivation to hold firm. Tighter policy in the West should help Japan by weakening the yen and importing inflation.
Draghi’s taper tizzy is sign of dangers to come 29 Jun 2017 Comments by ECB chief Mario Draghi drove up bond yields and the euro, despite later protestations that markets had misread him. The ado owes more to investor complacency than fuzzy talk. It highlights traders’ twitchiness and the challenges in withdrawing ultra-loose policy.
Draghi’s hints have more clout than Yellen’s deeds 28 Jun 2017 ECB chief Mario Draghi had more market impact by alluding to higher rates than Fed Chair Janet Yellen did by hiking them two weeks ago. That fits a recent pattern: central bankers who have yet to tighten policy are more apt to upset expectations – and that’s what moves prices.
U.S. GOP tries version of “extend and pretend” 26 Jun 2017 The mantra used to defer the reckoning on dodgy loans has come to Congress. Some lawmakers want to extend the 10-year budget horizon to at least 20 years. That would allow bigger tax cuts and deficits in the near term, but would be as irresponsible as the worst of Wall Street.
U.S. debt ceiling’s only value is as a warning light 23 Jun 2017 The Treasury wants lawmakers to raise the $20 trln cap on federal borrowing or risk a default. The 100-year-old idea of the limit is no longer practical, especially when Congress won't link it with budgeted outlays. Still, the ceiling is a symbol of America's growing debt burden.
Saudi Aramco IPO is exercise in reverse valuation 22 Jun 2017 The oil producer is worth $2 trillion, say its owners. The question might not be whether that valuation is right, but what Aramco’s owners and bankers will have to do to get it. A Breakingviews calculator suggests this will be a stretch of reason.
Germany’s euro-bond allergy will be hard to cure 13 Jun 2017 France’s pro-European president, Emmanuel Macron, has given new hope to advocates of joint euro zone debt. But expect Teutonic resistance. Europe’s biggest economy is loath to give an implicit bailout guarantee to its own regions so will hardly extend one to other countries.
Ireland pitches AIB float with a dose of realism 13 Jun 2017 The Irish government will sell 25 percent of the nationalised lender for between 3.9 and 4.9 euros per share. The midpoint values the bank above domestic rivals but at a discount to European peers. That’s a fair reflection of its bad loan book and domestic economic risks.
Lebenthal marks end of two eras on Wall Street 8 Jun 2017 It was 1925 when Alexandra's grandparents opened their municipal-bonds shop. Her father James and TV ads gave it renown in the 1970s. She's now exiting as CEO after a lack of scale impeded efforts to revive the firm post-crisis. Family offices, not brokerages, are the new order.
U.S. stocks and bonds are in economic tug-of-war 7 Jun 2017 Bullish equity investors have pushed the S&P 500 to new highs despite soft data and fading hopes for business friendly policies. With yields tumbling even as a new rate hike looms, fixed income is more attuned to a possible downturn. When the stories converge, it won't be pretty.