Monthly Archives:

June 2018

A new SONIA based bond. Does this mark the beginning of the end of LIBOR in public debt markets?

Last week the European Investment Bank (EIB) issued the first public bond based on the reformed SONIA benchmark, marking another step forward in the process of benchmark reform in the U.K. The 5-year, £1bn issue was priced with a coupon of 35bp above overnight SONIA.  The deal may very well serve as a benchmark for future issuance in the LIBOR-less world which the Bank of England and other regu…

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Time to sell Bunds?

German government bonds have gone from strength to strength in recent times; much like the German team at the World Cup – I wish! But is the latest Bund rally sustainable? I think not.

Let’s start with the bull case. In a recent blog, I described how Bunds had provided an efficient hedge against surging political uncertainty in Italy, due to the negative correlation between yields on German and…

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Bahrain: avoiding the first sovereign sukuk default?

Bahrain spreads have widened in recent months, despite the rise in oil prices. The market is focusing on the $750 million Bahrain Sukuk maturing on November 22, 2018. Given that the country’s international reserves are estimated at around $2.1 billion, the country will need additional funding to repay it.  The market consensus is that Bahrain will receive financial support from neighbouring Sau…

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BVTV: Accessing credit – cash bonds or CDS?

We have already seen several corrections in credit markets so far this year, providing a good opportunity to analyse these episodes from a volatility perspective to see whether they have created good entry points into previously expensive markets. Finding a good entry point is just the first step though. Next, we must consider whether cash bonds, or CDS, look more attractive.

Tune in to this we…

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Japan: weakening growth and inflation, and an unpopular government

I was in Tokyo last week, seeing a mix of economists, JGB experts and clients.  I was also awesome at karaoke, dressed as an astronaut.

The last time I was in Japan, over a year ago, I came away thinking there was a decent chance that the Bank of Japan would abandon its zero interest rate policy (ZIRP) as it was damaging banks’ profits, and sending a negative signal to Japanese households and b…

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BVTV: did ‘super week’ justify its billing?

The combination of the US-North Korea summit, crucial Brexit negotiations in the UK, mounting trade tensions, and a raft of central bank activity led some commentators to forecast that this would be the biggest week of the year. In fact, the beginning of the week was rather underwhelming, and it took a dovish ECB to really move markets. See how it all unfolded on today’s episode of Bond Vigilan…

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BVTV: Carry, valuations and fundamentals – the pillars of currency investing

Emerging market currencies have been back in the spotlight in recent weeks after significant repricing – so it seems like a good time to lift the lid on how we think about currency trading. While there are many different aspects to take into consideration, there are three key factors – carry, valuations and fundamentals – that we keep front of mind.

With lower returns from bonds in recent years…

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A life less easy for the ECB

Back in 2017, the economic outlook was increasingly rosy for the Eurozone. After years of ultra-loose monetary policy, a synchronised global recovery was in train. The Eurozone economy expanded apace, regularly surprising to the upside, unemployment continued to fall, the banking system had partially recapitalised and funding costs for corporates and sovereigns alike remained low on any measure…

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“The Great Economists” by Linda Yueh. Our interview, and chance to win her book!

We interview the academic and TV presenter about her choices of history’s most important economists, and ask what we can learn from them in solving our current problems. Also, win a copy of Linda’s book in our competition.

From Adam Smith, to Robert Solow, Linda Yueh’s latest book examines twelve important economists and suggests how we might use their thinking as we tackle modern society’s ec…

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Never a dull moment – trying to make sense of last week

Political turmoil in Italy and Spain, escalating trade tensions and, for good measure, unexpectedly strong US employment data – to say that markets had a turbulent few days would be an understatement. Taking a step back, here are three lessons I took away from last week.

(1) Market sentiment shifts can be brutal

Political risks in the European periphery are real – a statement that might sound t…

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