Author profile

Wolfgang Bauer

Years in the bond markets: 7

Specialist subjects: Investment grade credit (and the mysteries of microfluidics…)

Likes: Football, scuba diving and jiangsu cuisine

Heroes: Alfred Wegener, Charles Darwin and Stanislav Petrov

Eastward Ho! The euro area’s push into the Balkans

The inclusion of the Bulgarian lev and the Croatian kuna in the Exchange Rate Mechanism II (ERM II), which was announced last Friday, marks a crucial step for both countries to becoming the 20th and 21st members of the euro area. Bulgaria and Croatia won’t imminently join the currency union, though. As stipulated in the Maastricht Treaty, prospective members are expected first to demonstrate a…

Read the article

The U.S. labour market is back with a vengeance

Wowsers, the U.S. labour market never ceases to amaze bond investors. After the cataclysmic April U.S. employment report—nonfarm payrolls (NFP) had dropped by 20.7 million and the unemployment rate had shot up to 14.7%—there was broad agreement amongst market observers that May would prove to be another challenging month. In a Bloomberg survey of 78 economists, the most bullish forecast was a …

Read the article

Quo vadis, BTPs?

It’s been a wild ride in May for Italian government bonds, so-called Buoni del Tesoro Poliannuali (BTPs). The yield spread of 10-year BTPs over 10yr German Bunds first rose to c. 250 basis points (bps) after the German Constitutional Court had ruled that the ECB’s Public Sector Purchase Programme (PSPP) was partly unconstitutional. Subsequently, the Italian risk premium collapsed to c. 190 bps…

Read the article

Primary market volumes are a double-edged sword

One of the main topics in the investment grade (IG) corporate bond space over the past weeks has been frantic primary market activity. Every single day, with very few exceptions, there has been a relentless flood of new corporate bond issues. Year-to-date supply has risen to around $970 billion and c. €310 billion in U.S. and European IG primary markets, respectively, thus exceeding by far new…

Read the article

ECB to the rescue: Whatever it takes 2.0 ahead?

It’s been a rough two weeks in bond markets, to say the very least. Risk-off sentiment is reigning supreme. In Europe, looking at my screens this morning, iTraxx Xover—a bellwether of European high yield credit risk—jumped to its widest level since mid-2013, while the yield on 10yr German Bunds dropped to an all-time low below -0.8%.

In previous times of market turmoil, the European Cen…

Read the article

Craics begin to show in Ireland’s political establishment

With European media outlets focusing on the coronavirus and storm Ciara this week, only little attention was given to the Irish general election held on Saturday. Undeservedly so, I’d argue, considering that the election results mark a seismic shift in Irish politics. The surge of Sinn Féin, winning 24.5% of the first-preference vote, de facto ended the two-party dominance of Fine Gael (20.9%)…

Read the article

Has Europe really turned the corner?

Lately a growing number of indicators have suggested that the European economy might be out of the woods, heading towards a more robust recovery. For instance, while European inflation remains significantly below the ECB’s inflation target of close to but below 2%, it is worth highlighting that the year-on-year headline rate has in fact doubled from 0.7% in October 2019 to 1.4% in January 2020….

Read the article

The ECB resumes corporate bond purchases — here is what you have to know

All eyes are on central banks these days as major monetary policy decisions have been driving global bond markets. The eagerly awaited September meeting of the Governing Council of the European Central Bank (ECB) has given bond investors much food for thought. In particular, the new round of its asset purchase programme (APP)—announced in true ECB fashion revealing only the bare minimum of de…

Read the article

What if the ECB starts buying corporate bonds again?

In his distinctively dovish Sintra speech two weeks ago Mario Draghi left the door wide open for further loosening of monetary policy in the Euro area. All options seem to be on the table to bolster European inflation numbers, including a new round of quantitative easing. Draghi’s remark about the ECB’s Asset Purchase Programme (APP) still having considerable headroom fuelled hopes amongst man…

Read the article

Could ‘Green Bunds’ be a cure for Europe’s economic malaise?

Compared to one and a half years ago, when the prevailing narrative was still revolving around global synchronised growth, the economic outlook for Europe has darkened significantly. From ‘peak optimism’ levels in late 2017, Euro area real GDP growth has slowed to 1.2%, while Eurozone manufacturing PMI has dropped by more than ten points. Even the notoriously optimistic ECB eventually had to co…

Read the article