Rising interest: Investors have long been bemoaning the fact that returns have been way lower than they would crave, especially in the rarefied realms of the public sector. Signs now, however, are of a move towards ‘normalisation’ as far as interest rates are concerned, although there are suspicions in a number of quarters that some are beginning to think they should have been more careful what they wished for. The US is leading the way, with the FOMC’s March quarter-point rise in the Fed funds rate the latest step on a tightening route that...Read more
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The unanimous decision by the US FOMC – presided over by new Fed chairman Jay Powell – to raise the target range for Federal funds by a quarter point to 1.50%–1.75% on March 21 kept the juggernaut of tighter US money firmly on the road. Europe and eventually Japan will follow. In the meantime, prepare for shifts in fund flows, crowding-out effects and volatility.
Sovereign Green bonds are back in the headlines. With three deals launched in February alone, a month of issuance to build on could turn 2018 into the year of the sovereign Green bond as borrowers display their sustainable colours.
By proving it can access the debt markets in February, Greece has passed an important milestone on its journey back to economic normalisation. But while the country now has more options available to it, taking on new debts to pay off old ones is no long-term solution to its problems.
Gilt yields are expected to rise this year, as the Bank of England gradually puts up interest rates while the knock-on effects of the ECB’s QE programme also lessen as the scheme is wound down, although this is all playing out against a backdrop of Brexit uncertainty.
SSA issuers may look to front-load issuance in 2018 but the effects of QE will be felt long after it has finished, reducing the likelihood of a taper tantrum.
Upcoming elections in three of Latin America’s four biggest economies could usher in a new era of populism as a wave of anti-establishment sentiment that has redrawn the political landscape in the US and Europe ripples across the region.
Inflation-linked bonds have long been something of an interloper – the guest at a party that no one quite remembers asking.
Indonesia has become Asia’s premier sovereign issuer in deal conception and execution in what represents a transformation from the “flat-footed” to the “fleet footed.” Its success in offshore benchmarking has been a boon to the country’s issuers but the external and internal market outlook suggests this virtuous circle may be under threat.
After a quiet 2017, offshore Kangaroo issuance has bounced back, with over A$12bn printed so far this year. A traditionally steady market has seen the emergence of new products such as Green and Social bonds, as well as T2 issuance.
Catastrophe bonds have been growing in stature for a while, but a landmark World Bank deal has opened the door wider, especially for Latin American countries.
Foreign investors’ appetite for Argentine sovereign bonds is waning, as the government of President Mauricio Macri pursues populist policies and fails to get the public finances under control.