Monthly Archives:

April 2010

If it’s Wednesday, it must be…Spain. Tail wags dog.

Following the downgrades of Greece (to junk) and Portugal (to A-) on Tuesday, S&P looked upon the carnage in sovereign bond markets that ensued and decided that on Wednesday it would be Spain’s turn.  Spain’s sovereign credit rating was cut from AA+ to AA, just a notch, but enough to send its CDS spread up above 200 bps, and to see the credit spreads on its banks widen by 20 bps or more for sen…

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Swine Flu II

Exactly one year ago, an outbreak of flu in Mexico led to fears of a global pandemic.  ‘Swine Flu’ did indeed spread around the world, however for most countries it had only a limited effect on economic output.

We are now facing something that is likely to prove much more serious.  This time the epidemic can be traced to Greece, and contagion is rapidly spreading among the PIGS.  At the beginni…

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European corporate hybrids – the centaurs of the bond world

Guest contributor – Vladimir Jovkovic (Credit Analyst, M&G Credit Analysis team)

By now we are all well aware of the economic problems that Greece faces. Certainly we have mentioned Greece a few times on this very blog. But let’s not forget that the Greeks have given the world many, many wonderful things. Democracy. The musings of Socrates (“I am not an Athenian or a Greek, but a citizen of the…

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Lessons from Argentina

The past couple of days have seen Greek debt take a bit of a battering.  Spreads on Greek government bonds are the widest they have been since the inception of the Euro, and Greek 5yr CDS is wider by 100bps+ versus the beginning of the week. This seems to have been driven initially by nervousness around the anticipated bailout, with rumours that the Greeks are trying to renegotiate the deal tha…

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Speculative thoughts

Democratic governments are designed and exist to promote and protect the interests of their population. Thus they tend to be described as “good”. Capitalists are seen to be out for themselves and therefore acting in their own selfish interests. They are often described as “bad”. However, in order to have a prosperous society one has to combine the socialism and fairness of democracy with the ef…

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The X factor

Today the date for the UK general election was announced. May the 6th it is. It is once again time for British citizens to place their X to choose the future direction of the country. From a UK bond investor’s perspective this could well be a significant catalyst in determining the future direction of UK economic policy too.

Although the latest polls are quite close, it seems likely we’ll get a…

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Could a Fiscal Policy Committee do for UK creditworthiness what the Monetary Policy Committee did to inflation expectations?

The granting of independence to the Bank of England following Labour’s victory in the 1997 UK General Election caused a collapse in inflation expectations.   Whilst inflation expectations had been drifting down anyway, thanks mainly to globalisation and a demographic productivity boost, after independence was announced the 10 year breakeven inflation rate fell from 4% to 3.4% in just a couple o…

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