Monthly Archives:

March 2007

Record global M&A activity in Q1

The Financial Times’ main headline today (see here) was that there were $1130bn of M&A deals over the first three months of this year, the largest ever for a first quarter, and 14% higher than Q1 last year. Private equity accounted for a large chunk (the $45bn proposed LBO of TXU was included in the figures). As we have regularly stated on this blog (such as here), leveraged buyouts are getting… Read the article

Housing market scores a ten again

Net mortgage lending last month was £10.3bn, only a fraction below the record of £10.304bn set last December. Net mortgage lending has only ever exceeded £10bn three times, and all three have taken place in the past five months. The number of new mortgage approvals was also relatively strong, with the figure of 119,000 slightly higher than expected. As I have previously argued (see here), mortg… Read the article

'Covenant-lite' diet causes no extra spread for hungry leveraged loan investors

In my catch up reading from holiday (Argentina – stunning and very very cheap!), I noticed that World Directories, a European telephone directory company, has re-financed its euro-denominated leverage loan to be ‘covenant-lite’. Covenants are very important for us as bond investors. This is because they impose restrictions on a company’s management by preventing management from undertaking acti…

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Lessons to be learnt from over the Pond?

Both Jim & I have previously commented upon the US housing market woes and the sub prime lending concerns that have arisen in recent months. This week’s Economist magazine highlights the ‘growing enthusiasm for subprime lending in Britain’ better known as “non-conforming” or “adverse credit” (those interested can subscribe and read the article here) and asks the question whether we are setting … Read the article

Credit must go to Gordon Brown

The Financial Times last week ran a story entitled "The City must give credit where it is due", and I think they’re right. In my opinion, Gordon Brown has done an excellent job as Chancellor of the Exchequer. Like him or loathe him, the figures really do speak for themselves.

The Chancellor has consistently stated that his number one aim is to maintain and entrench economic stability in the UK….

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US recession averted? And Japanese land prices finally go up!

The markets believe that the risk of US recession is receding. We can see this from the shape of the US government bond market yield curve, where 10 year yields are now higher than 2 year yields (by 2 bps) for the first time since last August. In recent months the yield curve had been inverted, which statistically has been an excellent indicator of imminent recession. The change in view is at l… Read the article

Inflation rises again – but what is

As a follow-on to Jim’s note on the rise in UK inflation and the change in the basket of goods used to measure inflation, I think it’s worth asking what actually constitutes inflation?

The Bank of England traditionally used the Retail Price Index (RPI) as its inflation measure. In 1992, Norman Lamont brought in RPIX inflation (RPI excluding mortgage interest rate payment), and targeted RPIX of…

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UK February Inflation Snapshot

Stronger than expected airfares led the way in boosting February’s year on year CPI number to 2.8%, up from 2.7% in January, and still well above the Bank of England’s target (2%). There was also a big jump up in the RPI number to 4.6%, thanks to mortgage interest payments and other housing costs. This headline inflation number is now running ahead of average earnings growth (4.2% on the Bank’s… Read the article

Value at Risk – a new way to compare risks across funds

Value at Risk, or “VaR”, is a relatively new risk measure for the asset management industry, but is one that is rapidly becoming a benchmark for risk. The Investment Management Association (IMA) has already ruled that “sophisticated funds” (funds using sophisticated derivative strategies) must use VaR techniques, and it is likely that VaR will become a leading risk measurement in the asset mana…

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Icelandic farce continues

Fitch ratings agency, whose note on Iceland last year originally kicked off the Icelandic banking crisis, yesterday downgraded Iceland’s government bonds from AA- to A+. The Icelandic krona fell 1% against the sterling on the news. Fitch said that “the downgrade reflects new data on the balance of payments and the international investment position that points to a material deterioration in Icel…

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