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Changes in corporate bond market liquidity and the opportunities they present

One of the prevailing features of the last few years has been the increasing prominence of discussions regarding market liquidity and the seemingly downward trajectory it has taken across fixed income markets. This had led many market participants to question the resulting implications for market stability and volatility.

It makes sense then to try and understand the driving factors behind thes…

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The unintended consequences of Negative Rate World Part II. An update.

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…

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Banks oiling the wheels with liquidity

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 …

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UKAR – the biggest mortgage lender you’ve never heard of

U.K. Asset Resolution (UKAR) was established in late 2010 as a holding company for Bradford & Bingley (B&B) and the part of Northern Rock that was to remain in public ownership (NRAM).  Unlike other rescued institutions – RBS and Lloyds – whose progress we are kept well abreast of in the media, UKAR has flown under the radar somewhat. To give an idea of scale of the rescue; despite neither enti…

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A new source of supply in the ABS market

One of the features of the ABS market this year has been the lower levels of primary issuance. That, coupled with increased comfort in the asset class and higher risk/yield appetite has caused spreads to tighten.

We have had a few new deals, but 10 months in and new issuance volume is only about half the amount seen in 2012, and just a third of 2011 issuance.

What we’ve seen of late, despite …

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Tier 1 capital: too much faith in a Q&A, or why didn’t you call me?

It turns out that market participants may have put too much faith in the European Banking Authority (EBA). The EBA’s answer to a submitted question indicated that non-called bank Tier 1 instruments – or at least those similar to one described by the questioner – cannot simply be reclassified as Tier 2 capital after the first call date. The EBA’s answer to this specific question – which some wro…

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Small business, big deal – a look into peripheral SMEs

It should come as no surprise to any investor that European banks are still too large. Despite having reduced their balance sheets by around €2.4tn since 2011, they continue to have the world’s largest asset base, with an aggregate balance sheet size circa 3.3x the Eurozone’s GDP. Further balance sheet contraction can be expected in the coming years as the European banks strive to recapitalise …

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First home owner grants – a gift to new home buyers, or existing?

We aren’t the first to have a look at George Osborne’s “Help to Buy” scheme. It has been met by warnings far and wide. Sir Mervyn King stated that “there is no place in the long run for a scheme of this kind”, whilst Albert Edwards from Societe Generale was a little more blunt when he wrote that it was “a moronic policy”. Even the IMF and the OBR are getting in on the act, warning that the sche…

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Pese a las apariencias, los países periféricos de Europa continúan padeciendo una crisis de deuda

This article appeared in English on 26 April.

A comienzos de esta semana, las rentabilidades de la deuda española a 5 y 10 años cayeron hasta los niveles más bajos desde el cuarto trimestre de 2010. No cabe duda de que esta recuperación fue estimulada por los comentarios de Mario Draghi relativos a que el BCE haría « todo lo necesario para salvar el euro» y posteriormente alentada por la mejora…

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Peripheral Europe is still facing a debt crisis, despite appearances

Earlier this week, 5 and 10 year Spanish yields fell to the lowest levels since Q4 2010. The rally was no doubt kick started by Mario Draghi’s “do whatever it takes to preserve the euro” comment, and was given further fuel by the improvement in Eurozone economic data over the latter half of 2012, which was probably due in part to Draghi. However, the peripheral rally has continued this year in …

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