By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

United Technologies is catching a break from lenders. The 47 percent premium built into the $16.5 billion the U.S. industrial group is paying for the shares of aerospace specialist Goodrich makes the price look over-generous, especially amid gloomy stock markets. But cheap debt should make the deal easier to swallow.

The company indicated hoped-for annual synergies of up to $400 million. Taxed, put on a multiple of 10 and offset by the expected $500 million of one-off costs, these are worth less than $2 billion after adjusting for the five-year delay before they materialize in full. That’s little more than a third of the premium United Tech is paying to the undisturbed price of Goodrich. No wonder some investors initially got sticker shock.

Goodrich’s allure, however, goes beyond cost savings. Among other aerospace interests, United Tech owns Pratt & Whitney engines. As with the classic example of computer printers, the big profit in this kind of business comes from the aftermarket and 43 percent of Goodrich’s revenue comes from service calls, giving United Tech a new source of potential growth.

And on another financial measure, the deal doesn’t look so dear. Goodrich is expected to make operating profit of $1.6 billion in 2013, according to Thomson Reuters. Suppose $300 million of cost cuts are in place by then, and within a couple of years United Tech will be collecting a pre-tax 10 percent return on its total investment, including assumed debt.

The deal might have been more attractive but for someone talking to the press as the company scouted for financing. Then again, the timing is still good for the Connecticut-based conglomerate to borrow three-quarters of the needed cash. Investors are hungry for relatively safe blue-chip industrial credits. Throw in ultra-low Treasury yields, and borrowing is cheap. United Tech’s existing 30-year debt yields only around 4.4 percent.

The $15 billion of new borrowing shouldn’t damage the company’s credit ratings, either, thanks to a conservative capital structure — though it will be issuing new stock and curtailing buybacks. Even offering debt investors a bit extra, it’s hard to see the company paying more than 5 percent for new debt. For United Tech’s shareholders, that should take the sting out of the jet-fueled deal price.

By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Shareholders appreciate a good breakup story and Tyco is giving them more to love. The industrial manufacturing group dismantled itself into three parts in 2007. Now, one of them, Tyco International, is being carved into three more pieces. The company’s shares gained on Monday amid a broad market selloff. But while equity investors often see value in a less sprawling conglomerate, the same isn’t always true for bondholders.

Corporate debt is often an afterthought in breakups, or worse, a tool to help one unit look better at the expense of another. Tyco knows. Last time around, an ugly fight with creditors ensued after it tried to buy them out on the cheap, nearly derailing the dismantling. This time, it is paying them more heed.

Other lenders haven’t fared as well. Sunoco, for example, retained some $3 billion of investment-grade borrowings when it spun off its coal mining subsidiary. Now, the debt is rated junk and the company is scrambling to exit the refining business.

Meanwhile, at Dynegy, creditors are in a pitched battle with activist investor Carl Icahn, over a split of sorts. The company transferred assets away from the holding company and, importantly, out of the reach of bondholders should Dynegy ever stumble into bankruptcy — something management warned was a real danger before Icahn acquired a significant minority stake.

Tyco seems to have learned a lesson. In addition to historical image problems created by former boss Dennis Kozlowski and his $6,000 shower curtains, the company alienated debt investors four years ago. This time, by promising to redistribute $4 billion of borrowings relatively fairly among the residential alarms, pipeline widgets and fire and security units to retain their investment-grade status, Tyco seems to be going out of its way to keep bondholders on its side.

Investors in other conglomerates may not be so lucky. Over 60 companies have announced spinoffs this year and more seem destined to come. Weak debt covenants held over from the boom – and more recent ones — mean bondholders should be mindful of their vulnerability amid breakup fever. Tyco’s got a second chance. Others may not.

By Agnes T. Crane and Richard Beales The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Investors who spent August on the beach were fortunate to miss a bout of rollercoaster trading. And they will be rested for the next round, a taste of which came on Friday. The concerns behind the last volatile patch still haven’t been addressed. European debt trouble, the weakness of U.S. economic growth — underlined by the zero jobs created in August — and political conflict spell more wild rides.

Out of 45 developed and emerging stock markets tracked by S&P Indices, August left all but two underwater, by an average of 7.7 percent globally. Anyone who packed up at the end of July, sold stocks and bought Treasuries can at least count themselves lucky. After all, even those who stuck around for live deals have seen IPOs abandoned and one huge M&A deal — AT&T’s $39 billion purchase of T-Mobile USA — put in jeopardy.

But returning finance types shouldn’t forget that 44 of those same 45 markets are also still down from the end of August 2008 (the exception is Peru’s). Then, the collapse of Lehman Brothers and the worst of the crisis were still, just, in the future. A lot can go wrong.

The euro zone remains a basket case — at least in places. That’s belied by its currency, which has remained remarkably strong against the dollar at around $1.42. Yet dodgy sovereign debt tucked away in the region’s banking system makes it the biggest potential flashpoint for global markets.

The crisis has moved well beyond Greece. There is a metaphorical bull’s-eye on too-big-to-rescue Italy. In August, 10-year Italian bond yields soared above 6 percent before the European Central Bank stepped in and agreed, reluctantly, to buy Italian debt. Italy has to refinance a record 62.4 billion euros of debt due for repayment in September, and that could put the ECB’s calming influence to the test.

And there’s still a question over European bank funding. In August, fear erupted again about banks’ access to short-term sources of finance like U.S. money market funds. The funds are still lending, but for shorter periods. The shorter the term of lending — and it can get down to day-by-day — the easier it is for the funds and other lenders to pull out, leaving European banks to scramble.

By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

There’s talk of yet more government help for careworn American mortgage borrowers. Washington has already made Herculean efforts. But there’s no magic bullet and returns are diminishing.

Refinancing has recently returned to the agenda. The idea is to find ways for borrowers who are underwater, or nearly so and so unable to meet the usual criteria to replace their mortgages — to benefit from current low interest rates. This has actually been tried already, with miserable results.

Two years ago, President Barack Obama’s administration set up a program called HARP precisely for this purpose. Yet fewer than 1 million of the anticipated 5 million to 6 million borrowers have so far benefited from the scheme. Meanwhile, Obama’s much touted mortgage modification program, known as HAMP, has also led to fewer than 1 million people having their monthly payments permanently reduced, a far cry from the 3 million to 4 million initially expected. Both programs are still open.

A big hurdle to any such effort is the role of private sector banks. Banks’ mortgage servicing operations, which do all the paperwork, are overloaded and in some cases seem to lack even a basic level of competence. The Nevada attorney general, for instance, wants to tear up a 2008 settlement with Bank of America because of its subsequent bungling of loan modifications.

And while even Detroit got a car czar, there is no single government entity in charge of the multitude of housing-related initiatives. Treasury, the Department of Housing and Urban Development, the Federal Housing Finance Agency, the Federal Reserve and a host of other agencies all have their hands on the ball — but no one is accountable for watching the game, and many of the entities are distracted by other responsibilities.

That may help explain why the government’s initiatives have met so little success. The Fed’s first round of quantitative easing was an exception. It crucially stabilized the mortgage bond market and helped drive interest rates down. Banks may be standing in the way of other programs, but short of forcing them to act, new government schemes are doomed to similar ineffectiveness. The housing market will eventually recover on its own. At this stage, it would be better for lawmakers to deploy precious capital, real and political, elsewhere.

By Agnes T. Crane and Christopher Swann The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Rick Perry, the latest U.S. presidential hopeful, has said he wants to make the federal government “inconsequential”. Yet as Texas governor he has presided over the creation of more government jobs per head of population than Washington. These and other new jobs have been good for Perry’s state. But their origin contradicts his small-government rhetoric.

Though Perry’s critics may argue the point, Texas has weathered the downturn better than many other states. But it turns out job creation in the public sector, not the private one, has made much of the difference. Since the beginning of the recession in December 2007 through June this year, the number of state and local public service jobs grew by 6.5 percent, according to government figures. The private sector, meanwhile, is still playing catch up with non-farm employment down about 0.6 percent.

In fact, state and local governments in Texas have been hiring like crazy since Perry took office at the end of 2000. The number of government jobs in the state, excluding federal ones, increased 20 percent from January 2001 through June 2011.

Sure, that’s in line with population growth. With 25 million people living in Texas, according to the 2010 U.S. census, the population is also up about a fifth from 2000. But Nevada’s population grew 35 percent over the same period, and its public sector employment increased by less — some 20 percent. And a 10 percent rise in the American population as a whole over the decade was accompanied by just a 2.9 percent increase in federal government jobs.

Nor did Perry inherit a small-government state and simply scale it up as the ranks of its residents swelled. State and local government jobs in Texas add up to 6.7 percent of the state’s population, little changed from a decade ago. Even back in 2001, California had fewer public employees per head. And it has cut its public workforce to 5.7 percent of the population from 6.2 percent a decade ago.

These numbers don’t indicate Perry is a closet big-government socialist. But they hint at the difficulty of shrinking the public sector, and they remove any clear connection between small government and whatever success Perry claims for his Texas tenure. That in turn underlines that neither employment nor economic performance in general can be boiled down to simplistic soundbites.

By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The financial lifeboats are starting to get crowded. Investors in droves have sought safety in Uncle Sam’s debt, and even bonds backed by American homes. But on Thursday, vessels of refuge showed how quickly they can be rocked when too many investors pile in.

Swiss authorities had already signaled their displeasure with excessive interest in the local money last week when they cut interest rates to zero. Yet investors, prodded by ultra-low rates in the United States, kept buying. More stringent measures would be needed to hold off the masses, and media reports about possibly linking the soaring franc to the wobbly euro managed to send the Swiss currency tumbling.

Gold bugs also were abated, if perhaps temporarily. CME Group CME.O, the U.S. operator of derivatives and other exchanges, ramped up margin requirements for gold futures to slow the stampede. As a result, the ultimate escape for doomsayers, inflation hawks and speculators alike watched the price of their precious yellow metal fall more than 3 percent at one point on Thursday.

U.S. debt and government-guaranteed mortgage bonds have also seen an influx from investors trying to navigate the current storm despite the country’s loss of its AAA credit rating. The 10-year Treasury note was yielding as little as 2.17 percent on Thursday morning, 1.56 percentage point lower than its 2011 peak.

Bonds backed by U.S. home loans also got a massive lift this week when the Federal Reserve indicated it would keep funding costs extremely low for two years. That locks in easy, and seemingly safe, profit for those borrowing short and investing long. It’s no wonder investors aren’t feeling much buyer’s remorse given that yields are much lower than inflation, running at 3.6 percent on an annualized basis.

There’s of course a difference between speculative bubbles caused by greed and psychological ones born of fear. But so-called safety trades can blow up much the same way as risky ones. It’s just that policymakers, rather than the invisible hand, are the more likely holders of the pin.

By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Markets could force the Federal Reserve to use up the rest of its arsenal. Although investors found comfort in the central bank’s stated “range of policy tools” on Tuesday, by Wednesday morning they had a change of heart. The slide could press Fed Chairman Ben Bernanke to fire sooner rather than later to keep recession at bay. Trouble is, he’s packing a BB gun not a bazooka.

All of the Fed’s remaining options are controversial and none looks promising. But the Federal Open Market Committee’s decision to put a firm date — two years out — on its near-zero rates, over the objections of three members, indicates just how much the market turmoil has spooked policymakers already worried about the economy.

One possibility would be an updated version of “Operation Twist” from the 1960s. With it, the Fed could change the composition of its nearly $3 trillion balance sheet to favor longer-dated debt, in a bid to knock rates even lower.

There are two ways to do this. One, the Fed could reinvest proceeds from interest payments and maturing debt in longer-dated Treasuries. The other way would be to sell shorter-term bonds to buy, say, 10-year and 30-year bonds. But after the Fed’s bold action on Tuesday, the “Twist” looks too weak to accomplish much. Yields on 10-year Treasuries, after all, are already hovering around 2 percent.

The Fed also could opt to lower the measly 0.25 percent rate it pays banks to keep funds on deposit. Such a move, however, creates the potential for some nasty side effects, including endangering struggling money market funds.

And that leaves the printing presses. Theoretically, there’s no limit to the size of the Fed’s balance sheet. With every $200 billion of bond purchases equal to about a rate cut of 25 basis points, quantitative easing must still be high on the list for policymakers worried about recession and the possible deflationary pressures it would bring with it.