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Crossing the Climate Rubicon: Energy Credit in Transition

Energy transition pathways — the move from fossil fuel-based to zero-carbon energy — involve long time-horizons and are highly uncertain, with divergent outcomes based on assumed scenarios. The Coronavirus pandemic dented oil demand and has potentially brought forward peak global demand, if it hasn’t happened already. Against that backdrop, European International Oil Companies (IOCs) have over…

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Egypt’s maiden green bond – a first for the Middle East and Africa

Egypt has just entered the green bond market, pricing a debut $750 million five-year issue. The bonds join a small but growing asset class of emerging market sovereign green bonds. Since Poland issued a green bond in 2016, there’s been growing green emerging sovereign issuance including by Fiji, Nigeria, Indonesia, Hungary and Chile. These have been joined by broader social, sustainable and pa…

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How to get re-elected during a pandemic – lessons from CEE/CIS

The coronavirus crisis is having a profound and lasting effect on the global economy, with the vast majority of countries expected to get back to their 2019 level of economic output only in 2022. The consequences of the crisis are not just limited to the economy and to changes in human behaviour. In many countries of the CEE/CIS region, the crisis has coincided with election cycles and will le…

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Sustainability-Linked Bond – Look beneath the surface

Last week saw the first ever issuance of a Sustainability-Linked Bond (SLB) from an emerging market issuer. Brazilian pulp & paper producer Suzano issued US$750 million of Jan-2031 bonds at a yield of 3.95%. The bond coupon (3.75%) is subject to a sustainability performance target and shall increase by 25bps per annum from July 2026, if the issuer does not meet its target in 2025. It is differ…

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Shinzo Abe is stepping down – what does this mean for Japanese markets?

Today’s headlines have been dominated by the news that Japanese prime minister Shinzo Abe has announced his resignation due to health reasons. While markets seem somewhat spooked by this, there’s reason to see this as a good entry point into Japanese assets rather than a reason to run away.

Abe’s health has been a topic in the news for some time now. I would argue that his stepping down on …

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Will the EU Recovery Fund kickstart the green bond market?

The EU’s €750 billion recovery fund can be considered a major political achievement for the bloc. It’s good news for investors too, as the announcement helps to contain EU break-up risk as a result of Covid-19.

The plan has also received a positive reaction from green investors: the recovery fund can direct resources not only to hard-hit sectors, but also to sectors not directly affected by…

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Is market pricing of African eurobonds unfair?

When Ken Ofori-Att – the Ghanaian finance minister – presented mid-year budget revisions, he highlighted the huge challenges of the pandemic. The Ghanaian response to COVID-19 has been quick, well organised and aimed at stopping economic weakness becoming a depression. But the rescue is coming at a large financial cost to the country. The fiscal deficit is forecast to be around 11% of GDP in 2…

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Why corporate QE is now conventional monetary policy

One common theme in market commentary of late has been the unprecedented use of the word unprecedented! One thing that used to be unprecedented and is now commonplace is central banks buying corporate bonds. Now this seems to have become conventional monetary policy, it is worth asking “why?” and “is this appropriate?”.

We first wrote about corporate bond purchases in 2009. Bac…

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QE goes global: the case of Indonesia

The COVID-19-induced slowdown of the past few months has been different from past crises for a number of reasons. One of the most significant differences has been the greater ability of emerging market central banks to provide support to their economies, as we wrote about a few weeks ago. An interesting example is that of Indonesia. Last week, Indonesia’s central bank (Bank Indonesia – “BI”) c…

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High yield case study: McLaren – a car crash averted

Covid-19 has taken lives, dramatically reshaped the way we live and work, and challenged our view of a safe and stable world. Those of us who work in investment management, especially high yield fund managers like myself, have seen the pandemic put many businesses under severe financial stress. British high-end sports car maker McLaren was one of them. The company’s activities have been badly …

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