The euro’s 12-year low against the dollar is a mixed blessing for US companies. On the one hand, the US manufacturing sector is suffering from an uncompetitive currency and lower export revenues. But on the other, rock bottom European interest rates have given US companies an attractive opportunity to issue bonds denominated in euros and lock in cheap financing. For example, in the first quarte…Read the article
I’ve spent a bit of time in recent days looking at the performance of global investment grade (IG) credit. The chart below shows the year-to-date (YTD) ranges of asset swap (ASW) spreads for USD BBB 5-10 year corporate bond sectors.
Here are our three key takeaways:
- First, on the bright side, the spread of the USD BBB index as a whole has tightened by 18 bps YTD. Despite being modest in magni…
As value investors we would generally assert that every financial asset has its price. Few bond market offerings tick all the boxes, but if we are to be suitably compensated, and subject to certain red lines, we are generally sanguine.
Yesterday saw XPO Logistics, a third party US based logistics firm raise $2bn equivalent of debt across Euros and Dollars to part fund its acquisition of Norbert…Read the article
While generating a lot of concerns, one of the benefits of the strong growth of the emerging market (EM) corporate bond universe in the past decade has been the diversification of issuers. The asset class, which at $1.6 trillion is now larger than the US high-yield market, offers a vast number of countries and industries to invest in. Contrary to the EM rhetoric that has been making headlines i…Read the article
Government bond yields are extremely low across the globe. The highly unusual phenomenon of negative bond yields – even on debt issued by countries that still face a debt crisis – is now commonplace. In addition, investors are looking to protect themselves from the carnage in bond markets we have seen in recent weeks (for example, the “risk-free” German 2.5% 2046 bond is down -19% since the hi…Read the article
When in past years I have fielded calls from bankers faintly like Chad ‘Ace’ Jefferson III (A Brave New World: Zero Yield Corporate Bonds) requesting any potential interest in new index-linked corporate bond issues, I have often begun my feedback by pointing to an old maxim. This well-known dogma posits that an index-linked corporate bond should price 25 basis points or so wider than a comparab…Read the article
Almost two years ago to the day we wrote about a return of animal spirits, the LBO of Heinz by Berkshire Hathaway and 3G, and the significant role debt had to play in the transaction. Yesterday Heinz announced that it is to merge with Kraft Foods to create the fifth largest food and beverage company in the world. The transaction will see Berkshire Hathaway and 3G invest an additional $10bn in t…Read the article
I am just back from a fascinating investor trip to the Middle-East, where I spent a week meeting with corporate and government bond issuers as well as market participants in the United Arab Emirates (UAE). We spoke at length about Islamic finance, the oil price impact and geopolitical risk.
When I asked the question of the oil price impact on the region to corporate issuers and government offic…Read the article
The rapid growth of the hybrid corporate capital market (non-financial) over the last few years has provided fixed income investors with an opportunity to access a quasi-equity income stream. Much like equities, hybrid bonds are perpetual in nature (though an option to call exists), and allow the issuer a degree of discretion over coupon payments. And, whilst they rank ahead of common equity in…Read the article
Picture the scene: a meeting room, 40 floors up, plate glass floor-to-ceiling windows with views of central London in the background. At the polished mahogany table sits Hans Schmidt, the CFO of a major consumer global goods company. In walks Chad “Ace” Jefferson III, the latest in a long line of investment bankers assigned to cover his company. Behind Chad follows an entourage of five impeccab…Read the article