There’s no doubt that the oil industry has seen better days. Adding to present-day woes of price levels of $30-40 per barrel are questions about the long-term viability of the industry’s business model as a whole. Take for example the Rockefeller dynasty and Saudi Arabia, two names synonymous with gigantic fortunes built on oil. Well, the Rockefeller Family Fund just announced its intent to div…Read the article
Russian corporate bonds were one of the best performing asset classes last year, with a total return for the JPM CEMBI Russia index of +26%, despite Russia’s GDP dropping by -3.7% on the back of a hugely challenging economic backdrop and geopolitical headwinds. I recently spent a week in the cold of Moscow’s early spring, meeting banks and corporates to help me assess whether the economic sanct…Read the article
We recently blogged about the uninspiring performance of many fixed income asset classes in 2015. Investment grade (IG) corporate bonds certainly had a tough year as credit spreads trended wider, both in the USD and the EUR market. Taking a look at option-adjusted spread (OAS) levels, USD IG credit (+29 bps) marginally outperformed against EUR IG credit (+36 bps) in 2015. In both cases periods …Read the article
The temptation to ‘juice-up’ shareholder returns with low yielding corporate debt has been too much to bear for many companies and their investors in recent years. This fad has been well documented and though it may not be a trend we creditors like to observe, we haven’t been entirely surprised to see it play out in 2015 given the seemingly large valuation disconnect between the cost of debt an…Read the article
In our recent Chicago video we touched upon the subject of recent mergers and acquisitions (M&A) activity in North America having surpassed pre-crisis volumes. Though hard to quantify, it’s safe to assume that the M&A surge has been one of the main driving forces behind the widening of credit spreads in the USD investment grade (IG) corporate bond universe this year. Numerous IG companies have …Read the article
It has been a rough ride for metal and mining giant BHP Billiton. Revenues have come under persistent pressure due to weakening commodity prices. Despite one of the strongest balance sheets in the sector, promises made to shareholders have proven tough to keep.
With these commitments in mind the company turned to a nervous bond market earlier this week for some $6.44bn equivalent of hybrid deb…Read the article
Brazil has been facing the perfect storm since the re-election of Dilma Rousseff in October 2014 and asset prices in Latin America’s largest country have collapsed. Credit default swaps on Brazil 5-year sovereign debt in US dollar and hard-currency corporate bond spreads widened to as much as 545 bps and 938 bps respectively, as at the end of September 2015, which is higher than during the 2008…Read the article
Reverse Yankees, i.e., bonds issued by US entities in currencies other than USD, have become an integral part of the global investment grade (IG) corporate bond universe, particularly in the European IG space. For treasurers of US companies the issuance of EUR-denominated Reverse Yankees offers several advantages:
- In case a US firm reporting its results in USD has operations within the Eurozon…
We have frequently written about investment grade (IG) credit spreads over the course of the past year. Today I’m going to dissect the IG universe further and take a look at quality spreads, i.e., the additional risk premium investors can earn when switching from one credit rating band into the next lower band.
The chart below shows how the differential in asset swap (ASW) spread between AA and…Read the article
We recently highlighted a bond covenant that benefited fixed income investors. After the good, this week we have seen the bad. In this case, a bond covenant may impact bondholders in a detrimental way. Both examples are evidence of how critical it is to have a thorough understanding of bond documentation ahead of investing in a bond.
Kuwait’s third largest bank, Burgan Bank, announced in a regu…Read the article