In this 15-minute interview I ask M&G’s Greg Smith, an emerging market debt strategist with a speciality in Africa and formerly a World Bank economist in Zambia, how the continent is coping with the Covid-19 pandemic. We also discuss how worried we should be about the negative headlines coming out of the region over Zambia’s recent default on its international bonds. Is this the start of a w…
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RPI reform: result as expected – market reaction not
The background to Wednesday’s announcement
In line with market consensus, on Wednesday the government announced that RPI would be made into CPIH, a lower number. This is not being done for political reasons by the Chancellor, but for statistical ones.
As I have written about previously the national statistician has made clear for years that it does not like RPI, and that it has been frus…
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“High” Yield yields hit a low
The dramatic rally in US high yield bonds since the end of September saw yields reach lows of 4.6% earlier this month, the US high yield index’s lowest level since 2000. Yields have risen modestly since then but remain very tight: 4.9% at the time of this writing. The US high yield bond spread over risk-free government bonds has narrowed close to its pre-Covid level (see chart below), a tren…
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This recession, banks are the good guys
The Covid-19 crisis has been a very different recession in a number of ways. One that I think is particularly interesting is the role of banks. While it is a vast oversimplification, ask ten people what caused the great financial crisis, and nine will answer “the banks!”.
This time round, it has been the commercial banks that have helped many economies to remain functioning. Nowhere is that…
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Seven scary charts – happy Halloween!
It’s that time of year again. US elections? No – something even scarier. This Halloween, we’ve found no shortage of spooky charts. Here are our top seven, showing some of the most frightening spectres lurking below the surface of financial markets… don’t read them before bedtime.
One of the scariest aspects this year is the huge disconnect between asset prices and macro fundamental…
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This time is different: bust to boom — the t-shaped recession explained
The 2020 recession is a direct result of global government policy aimed at protecting populations from the virus outbreak. This has curtailed global growth dramatically, though in a very different way to previous recessions. In this blog we will explore the continuing implications of this and look forward to 2021.
This time is different
This recession is primarily a service-led …
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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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