Tag Archives:

sovereign debt

Emerging Market debt: 2014 returns post-mortem and 2015 outlook

2014 was quite an eventful year for Emerging market (EM) fixed income. After a period of strong performance which lasted all the way to September, markets corrected significantly in the latter part of the year as the escalation of the Russia crisis and the plunging oil prices triggered the most significant drawdown since the “taper tantrum” of June 2013. All in all, emerging markets still poste…

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Italy: the good, the bad and the…politicians

Italian politics has been in the international news, again. Markets tend to fear instability and Italy is always a creative and boundless source of uncertainty. We Italians have a wonderful ability to put ourselves into trouble. The good news is that markets in recent weeks have held up more than in the past.

1 – Political life in the peninsula

In the last few weeks, research from many well-kn…

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Middle East research trip – a rare oasis of attractive bond valuations

My last research trip video to Asia was deemed by our marketing department to be so bad that we all had to be sat down and told what would be common sense to most people; apparently it’s not a great idea to speak to camera next to a busy airport runway, and you can’t see anything if you record yourself in your hotel room at night with the main lights off. So hopefully this effort is a slight im…

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Should Eurozone governments use their gold reserves to lower their borrowing costs?

Last week we had Marcus Grubb of the World Gold Council come in to talk through the idea that Eurozone countries with high debt burdens and unsustainably high bond yields should unlock the value of their otherwise yieldless gold reserves by using it as collateral, and thereby borrow cheaply for at least that portion of their financing needs. The chart below shows that Germany (obviously one of …

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Two charts for anyone who still believes in ‘decoupling’

Q2 was a grim quarter, not just for the Eurozone economy but for the global economy. The downturn in Citigroup’s economic surprise indices that began in March picked up speed through to June, while PMIs in almost all corners of the world weakened in Q2 as can be seen by the PMI heatmap.

The good news is that the authorities have begun to respond to the downturn with more stimulus (as seen by ye…

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Eurozone sovereigns – all eyes on the ratings agencies, watch those tails go

People are still wondering what caused the big surge in Italian and Spanish government bond yields back in July that lurched the Eurozone debt crisis into the current very serious phase (eg see here).  I suspect that, if anything, the most likely trigger was Moody’s decision to cut Portugal’s rating from Baa1 all the way down to Ba2, a four notch downgrade, on July 5th this year.  The junking o…

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Did Benford’s Law show that Greece fiddled its figures?

There’s a very interesting article in the British Airways in-flight magazine this month by Tim Harford, also known as the Undercover Economist in his FT column.  In it, he points out that Benford’s Law showed that Greece’s reported macroeconomic statistics could have been dodgy well before we knew that for a fact.  Benford’s Law shows that in real-life data, numbers are distributed in a non-ran…

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So the authorities have seemingly realised the old EFSF plan doesn’t work. What about the new plan?

There has been a lot of press coverage about the proposal to turn the existing EFSF (European Financial Stability Facility) into a monoline insurer of sovereign debt, where the new structure would be called the European Sovereign Insurance Mechanism (ESIM).

How is the ESIM supposed to work in theory?  No concrete details have been announced, but the basic thrust of the proposal is that the EFSF…

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Forget stress tests – ring fencing banks from sovereigns is the real issue

So the results of the bank stress tests are out. Do they add anything from an investor viewpoint?

Well, despite the best efforts of the European banking Authority, we didn’t get the harmonised EU data we were hoping for. To say that there are inconsistencies in the data would be an understatement.

Disclosure varies hugely bank by bank, especially in areas such as their Loan to Value ratios for …

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European sovereign debt fears – limited impact on European corporate bond markets

Strong earnings results, low inflation expectations and a view that the ECB will have to keep interest rates lower for longer to support the economic recovery has seen demand for European corporate bonds remain fairly robust.

That is not to say that European corporate bond markets have been unaffected. Those credits that have been most impacted by the sovereign debt worries have unsurprisingly …

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