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…Read the article
Guest contributor – David Covey (Financial Institutions Analyst, M&G Fixed Income Team)
The end is coming for the London interbank offered rate (Libor). Ten years after suspicions emerged that this key interest rate was being manipulated in the financial crisis, regulators are ramping up their efforts to replace the benchmark rates. The Bank of England (BoE) and US Federal Reserve are leading …Read the article
The Slavery Abolition Act of 1833 formally freed 800,000 Africans who were then the legal property of Britain’s slave owners. What is less well known is that the same act contained a provision for the financial compensation of the owners of those slaves, by the British taxpayer, for the loss of their “property”. The compensation commission was the government body established to evaluate the cla…Read the article
1. The ECB can act quickly when considering if a bank has reached the point of non-viability (PONV), and enacting a resolution plan. The speed with which regulators acted clearly took the market by surprise. At the same time, how the regulator determines a bank to be non-viable is still a grey area (considering the situation around some of the weaker Italian banks).
2. EU stress tests are not…Read the article
It was big news when Postfinance, the first Swiss bank categorised as “too-big-to-fail”, announced the introduction of negative interest rates to customers holding deposits of CHF 1 million and above. Many are now asking how long it will take until banks apply this approach to retail savers. I would argue that it may not be too long given the situation for Swiss banks remains challenging.
Part …Read the article
Having recently blogged about the potentially eligible universe of the Corporate Sector Purchase Programme (CSPP), we were naturally eager to find out which corporate bonds the European Central Bank (ECB) has actually been buying. On Monday, the ECB eventually published the highly-anticipated list of their bond holdings.
Except that’s not what happened. Instead of the ECB releasing a neat conso…Read the article
At the start of April I wrote about some of the unintended consequences of central banks setting negative interest rates. I also promised to update the blog as we spotted more interesting implications, and asked readers to submit examples too. Thanks for those who got in touch. Here are some more of the interesting things that happen when the zero lower bound ceases to exist, as well as links…Read the article
Expectations are high that European Central Bank (ECB) president Mario Draghi will announce additional easing measures at the next monetary policy meeting on Thursday this week. If the ECB decides to provide further stimulus via extended (or expanded) QE and/or lowers its negative deposit rate further, the Swiss National Bank (SNB) has some thinking to do. I am probably not the only Swiss perso…Read the article
An overriding theme for U.S. high yield energy companies in the current oil price environment is having sufficient financial liquidity (cash, bank credit, etc.) to cover their obligations as earnings come under pressure due to low oil prices. Maintaining liquidity until oil prices recover will be paramount for energy companies to survive, even for those names that aren’t especially levered. It …Read the article
Matt’s and James’s recent blogs outlined some of the issues markets face when rates go negative. This is obviously no longer just a theoretical debate, but has real investment implications. Why do investors accept sub-zero rates when they can hold cash ?
To recap using Swiss Francs for example, it makes sense for a saver from a purely economic view not to deposit a Swiss Franc note into a negat…Read the article