BOJ buys time and friends with yield-based reboot

September 21, 2016

The Bank of Japan has ditched its money-printing goals, pledging instead to keep 10-year interest rates at zero until inflation exceeds 2 pct. The central bank’s latest overhaul means it is less likely to run short of debt to buy, and eases the financial sector’s pain.

Carney guessing game feeds bond market distortion

September 13, 2016

The Bank of England has revealed corporate bonds eligible for its 10 billion pound buying spree. Its requirement that companies make a material contribution to the country still throws up some anomalies. Second-guessing the central bank makes capital markets less efficient.

Believe bonds not stocks on Brexit damage

June 30, 2016

Stocks have rebounded after the referendum, suggesting Britain’s prospects aren’t too grim. Yet falling gilt yields point to bleaker outcomes. In the absence of hard economic data, a post-vote slump in consumer morale supports the pessimistic thesis.

Brexit is reopening euro zone sovereign wounds

June 14, 2016

France’s bond yields are rising while Germany’s are falling. It’s a warning markets may doubt the integrity of the euro zone if a UK exit triggers copycat referendums. The ECB has neither the power nor the mandate to fight the kind of extreme outcomes that could ensue.

Time for banks to go cold turkey on sovereign fix

April 18, 2016

Europe is considering tightening rules that make it easy for lenders to own government debt. Banks addicted to sovereign punts would suffer, and governments lose wiggle room. Yet reform could hasten euro area integration, while ECB bond-buying makes it a less scary prospect.

Bank CoCos deserve all the brickbats

March 18, 2016

Deutsche Bank’s John Cryan thinks new hybrid bank bonds are flawed. Market turmoil is forcing regulators to clarify when baffled investors get coupons. Yet unless there is also standardisation of when they convert from debt to equity, CoCos will always be prone to death spirals.

Deutsche makes investors offer they should refuse

February 12, 2016

The German bank is offering to buy back 5 billion euros of bonds. A big take-up means more capital for Deutsche, but could also imply a lack of confidence in the bank’s solvency. Given the potential for bond prices to snap back, it may be better for investors to sit it out.

German CDS imply bank doom loop is unbroken

February 10, 2016

Market turbulence has led investors to snap up safe German bonds, yet the cost of insuring against a Teutonic default is up. Blame a rout in Deutsche Bank shares. Until Europe’s banking union is complete, governments are the ultimate backstop if big lenders get into trouble.

Deutsche hybrids: from poster boy to problem child

February 9, 2016

The German lender has moved to reassure investors fretting about delayed coupons on its new AT1 securities, after CDS prices collapsed. Unlike hybrid forebears in 2008, AT1s should absorb losses. Yet instead of dampening volatility, the fear of a trigger is exacerbating it.

Puerto Rico exposes dearth of bond vigilantes

January 7, 2016

Tax perks and a thirst for yield meant bond buyers tolerated bad fiscal practices for years. They only seriously pushed up borrowing costs after the island’s $70 bln debt crisis became all too obvious. Foolish financial crowds had better wise up to other U.S. danger zones.