The positive and negative effects of central bank intervention after the 2007-08 financial crisis have been widely debated and are still – ten years on – not fully understood. For example, keeping borrowing costs artificially low for years has certainly helped spur economic growth (great), but by incentivising companies to take on more debt (not so great). The debt increase also makes me questi…Read the article
November is proving to be even worse than October, especially for Credit markets, amid plunging oil prices, corporate woes, executive scandals and protracted unconvincing economic data, all on top of a global interest rate rising cycle. Corporate bonds, which have been supported by loose monetary policy for over a decade, particularly felt the cold: US Investment Grade (IG) spreads last week po…Read the article
Last Saturday marked exactly 10 years since Lehman Brothers went bust. Are we still suffering the consequences of the Global Financial Crisis that followed? Had the crisis not occurred, would we have today’s political uncertainty? Watch M&G fund manager Wolfgang Bauer and Investment Director Ana Gil discuss how the clash between growth and political risk are driving markets today, and what oppo…Watch the video
The Bank of England’s (BoE) Term Funding Scheme (TFS) came to an end earlier this year. As a brief recap, the scheme offered four year funding at the BoE Base Rate plus a fee to the banks and in turn, the banks were required to lend into the real economy (the fee was dependent upon the net lending of the bank). We previously wrote about the scheme here and here.
The borrowing scheme has been hu…Read the article
In its 2016 Annual Report entitled ‘making tomorrow a better place’, Carillion claimed they had ‘a good platform from which to develop the business in 2017’. Less than ten months after publication, Carillion went into compulsory liquidation, bypassing administration and the chance to continue trading. Assets will be realised and distributed to creditors, leaving little or no value remaining. Bu…Read the article
It was the best of times, it was the worst of times – to phrase it in a Dickensian way – for bonds of British automotive and aerospace components company GKN. After Melrose Industries, an investment firm specialised in turnarounds of manufacturing businesses, had made an unsolicited takeover bid for GKN on 8th January, GKNLN 3.375 05/12/32s have enjoyed capital gains of 1.7%, whereas the cash p…Read the article
Let’s be honest, 2017 won’t go down in history as the most exciting year for investment grade (IG) credit markets. IG credit spreads have moved more or less in one direction only: lower and lower. Still, there are valuable lessons to be learnt. Here are our key takeaways.
Positive mood swing in Europe drove EUR IG outperformance vs USD IG.
Back in early 2017 the logic was as follows: After the…Read the article
Guest contributor – Simon Duff (Credit Analyst, M&G Credit Analysis team)
Last week, International TV network operator Discovery Communications announced the US$15bn acquisition of Scripps Networks. Scripps owns TV networks focused on food, home and travel, so it fits with the factual or “non-scripted” focus of Discovery’s core networks (Discovery, TLC, Animal Planet). It also offers an oppor…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
There are a lot of misconceptions about defaults in emerging market (EM) debt. Too often, EM corporates are either considered ‘serial defaulters’ compared with their developed market peers, or seen as a single and homogeneous geography. In reality, default rates follow economic cycles, and having a regional, if not country, approach to default risk remains paramount due to different jurisdictio…Read the article