Europe’s credit boom locks in mediocre returns

April 16, 2015

Investors are throwing money at European companies. Carrefour and Danone paid little over 1 pct a year to borrow for a decade; Novartis got 20-year funds at similar levels. A Breakingviews calculator shows how bond buyers’ generosity could backfire.

“Seller beware” when profiting from market calm

July 10, 2014

Volatility, gauged by indicators like VIX, is ultra-low. While it could be the calm before a storm, investors including Pimco have been selling insurance against price swings. It’s one way to make money amidst shrinking yields, but it’s also a risky bet against the unexpected.

Triple financial mystery remains unsolved

June 17, 2014

For the last three decades inflation and interest rates have generally fallen in rich countries, while debt has risen. Economists have many explanations, but are continually surprised by the persistence of the trends. The ignorance is dangerous for policymakers and investors.

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.

Euro zone crisis over – for now

March 2, 2012

Italian and Spanish 10-year bond yields have fallen below 5 percent. Cheap money and new governments’ ability to reform have won over markets. But the ECB will be reluctant to help more, Greece and Portugal are still problems – and the whole periphery is mired in recession.

Spain replaces Italy as bad boy in euro class

March 7, 2012

Since August, Italy has been the big troubled euro economy, with higher yields than Spain. But Rome’s borrowing costs are now a touch tighter than Madrid’s. Economics and politics are responsible for the flip. The gap could widen further – at least until Italy’s next elections.

Safe haven tremors signal big investment shift

March 20, 2012

The first cracks are appearing in the high edifice of safe haven bonds. Sovereign yields are rising, gold weakening and the dollar advancing after a decade of weakness. Global investors should assume that we are on the cusp of change.

ECB short of firepower as Europe gets worse again

March 23, 2012

Data suggest continued recession in the euro zone, with weakness even in its core economies. Spanish yields are up again. But it’s harder now for the ECB to respond. Its expanded balance sheet can’t easily spray more liquidity. And German inflation worries make a rate cut tricky.

Spain reveals holes in Europe’s crisis plan

April 5, 2012

Rising Spanish yields have thrust the euro zone back into crisis mode. The ECB’s liquidity boost is fading, and the obsession with austerity looks self-defeating. Though Madrid could use some support for its banks, a full bailout will be difficult. Self-help is the only answer.

Spain won’t be saved without grand master plan

June 19, 2012

Avoiding the great Greek scare hasn’t given the euro zone any relief on Spain, whose yields remain at record highs. Madrid has virtually done all it can. Now euro leaders must come up with a credible and long-term plan at their summit next week. Obviously they’re not there yet.