Monthly Archives:

May 2009

Stirrings in the European high yield primary market

We’ve talked about new issuance a few times recently on this blog (see Matthew’s blog from December here and my more recent comment about the record issuance in Q1 here). But the focus has been firmly on issuance in the investment grade market, until now.

The European public high yield primary market was essentially closed for 18 months, with no new issues at all from August 2007 until January …

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"Fire, Fire in Noah’s Flood’ – are we right to be scared about inflation?

Right now the most commonly submitted question to this blog is about the impact of QE, high budget deficits and zero rates on inflation.  Most people are inclined to think that after a brief period of deflation, largely as a result of lower year on year energy prices, we’re heading into hyperinflation.  I guess my cop out answer to that question is that we just don’t know – it is uncharted terr…

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Bradford & Bingley skip bond coupons – is this legal?

We’ve had a question from a reader of this blog about yesterday’s announcement that Bradford & Bingley will be skipping coupon payments on some of its bonds and whether this constitutes an event of default.

Actually it doesn’t, and why not?  Well, because HMT says so…

Back in February the government made changes to the terms of its nationalisation of B&B, using power it gave itself under the ne…

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Reaction to S&P putting UK sovereign debt on negative outlook

This morning S&P announced that the outlook on UK’s long term sovereign credit rating was put on negative outlook.  It’s important to stress that a change in rating outlook does not mean that a downgrade to AA is inevitable, but obviously the risk has increased (S&P say the chance is “one in three”). The primary reason for the change was that the “UK’s net general government debt may approach 1…

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Are corporate bonds still attractive following the rally?

In the worst of the Great Depression, US BBB spreads peaked at 724 basis points (see chart).  Then in Q4 last year, extreme risk aversion and a huge number of distressed sellers meant that credit markets collapsed.  On December 16 2008, soon after we last produced the chart on this blog (see here), US BBB spreads peaked at a 76 year record of 804 basis points.

This year has seen a big bounce i…

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QE or not QE? That is the question

Whether you want to call it quantitative easing, credit easing, printing money or “enhanced credit support” as Jean Claude Trichet prefers, the ECB yesterday took a step in that direction. At the post rate decision press conference, Trichet announced that they had agreed in principle to purchase up to €60bn of euro-denominated covered bonds, which is roughly 10% of the public market. He said th…

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