Breakingviews

For bonds, crowds are more dangerous than Draghi

June 4, 2015

The ECB chief’s relaxed attitude to volatility is fuelling gyrations in euro zone debt markets. But Mario Draghi is only stating the obvious. Supposedly risk-free assets have become some of the most perilous. The biggest hazard for investors is being part of too big a herd.

Negative yields can go much more negative

By Edward Hadas
February 2, 2015

Investors now pay for the privilege of owning almost a quarter of euro zone government debt. The practice sounds strange, but monetary theory calls for it. If deflation sets in, yields could keep falling. The result might be the end of cash, or a new theory about interest rates.

Deutsche Bank’s fixed income wager yet to pay off

October 29, 2014

The German group hasn’t yet paid all the high legal costs of past sins or satisfied future regulations. But its biggest bet is that investment banks are in a merely cyclical, not a structural, decline. Despite solid third quarter trading revenue, the case is far from proven.

Asset price disinflation may be next big thing

By Edward Hadas
October 6, 2014

Iron ore led the way, oil is following and stocks may be joining the bandwagon. Even some hot property markets are cooling. Less ultra-loose U.S. monetary policy is blamed, but this looks more like the spread of a disinflationary tide. If so, safe bond prices will keep rising.

German yield curve is the safest one to play

August 18, 2014

The spread between short- and long-dated bond yields keeps shrinking in the UK, United States and Germany. Stronger economic activity explains the Anglo-Saxon moves, economic weakness drives the Teutonic trend. The trade that relies on euro zone frailty looks the least risky.

ECB abets risky passion for peripheral debt

May 9, 2014

A promise of monetary easing is pushing down Italian, Spanish, Irish, and Portuguese bond yields, some to record lows. A harsh form of market discipline forced these countries to accept bitter medicine in crisis times. The regimen may now be too lax to compel them to get fitter.

European markets’ cheer may well run out of puff

January 20, 2012

ECB-fuelled liquidity is supporting euro zone bond markets while equities stand to benefit from the lower currency. Pan-market optimism may be merited: but only if both factors spur economic growth. If the EU economy stagnates, the new year buoyancy could rebound on investors.

Beware of distorted markets

By Edward Hadas
February 24, 2012

The recent rise in some asset prices might be a sign of economic strength, but it may be the almost mechanical effect of monetary aid from central banks. In a world of huge deficits, negative real rates and too much leverage, financial markets no longer give clear signals.

LBO trade gets ready for a duller new normal

December 28, 2009

Leveraged financiers were mostly well behaved in 2009; if only because the credit crunch took their dangerous toys away. But the private equity world shouldn’t expect a brand new credit boom in the year ahead.