In boxing, the crowd often rallies around the underdog – especially if the fight is in the country that invented the sport. After tumbling to the canvas, Greece has staggered back to its feet and is now risking everything in order to win.
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Yet another year of volatility and uncertainty is facing the eurozone’s embattled periphery. Sovereign debt issuance started with a bang this year, but concerns about contagion spreading from the Syriza political victory in Greece, and infecting the minds of voters in Spain come December’s general elections in Madrid, could spook global investors.
The easing of the eurozone crisis has encouraged sovereign bond investors to start differentiating between peripheral countries that had once been lumped in one basket.
Are eurozone banks weighing risks successfully? No, says the Basel Committee, particularly when it comes to assessing government bonds and loans as risk-free assets. Time, the Basel guys say, to change the rules – though that could saddle the region’s struggling banks with yet more extra capital demands.
Basel III’s liquidity coverage ratio has driven increased bank demand for sovereign and agency issued debt, but as the ECB begins quantitative easing, the supply of high-quality liquid assets may come under pressure.
Issuers are printing long euros and short dollars – a theme that seems unlikely to change, with yields remaining at rock-bottom levels in the eurozone and interest rates set to rise in the US in the second half of the year. But will this simple story change if quantitative easing works – and what will happen to holders of very long dated euro bonds if inflation and growth surge back in the eurozone, forcing yields across the region to spike?
Syriza’s convincing victory in the latest Greek elections offers a little clarity about the direction the country is going in. Questions remain about how far it is willing to go in pursuit of its anti-austerity agenda and what concessions it can extract from its debtors. But analysts do not expect Greece to leave the euro, with a compromise expected to enable it to avoid a default.
This year will provide a crucial litmus test for privatisation. Slovenia has proven willing to sell off a wealth of state assets in search of a balanced budget, as has Cyprus’s modernising, post-bailout government. But reform agendas are stalling elsewhere, notably in Russia, suffering with its own problems, and Greece, where the new Syriza-led government is leading the charge to stymie the process and bring key assets back under the government’s purview, not forgetting the upcoming sale from the second half of 2015 of once-troubled banks in...
There are signs that the market for socially responsible investment is about to take off – but can “social bonds” ever match their green cousins?
Mario Draghi pulled yet another rabbit out of the hat, surprising investors on the upside by launching a scaled-up quantitative easing programme on January 22, with the ECB set to buy €1.1trn worth of bonds between now and September 2016. Well received by markets, the eurozone’s iteration of QE aims to tackle deflation for good and bring back jobs and growth to the eurozone. He has also left the door open to a far more permanent QE if inflation doesn’t come surging back soon, echoing the multi-stage QE programmes favoured by the Federal Reserve...
It is an inverted curve that is acting as a brake on Dim Sum issuance at the moment. Should that change, more SSA issuers are expected.
Australian onshore accounts have traditionally only focused on the best-known SSA names. But as the market expands so too are their horizons.
The potential risk posed by Venezuela and Argentina to Andean development bank CAF – flagged up by Standard & Poor’s in October – is largely illusory.
German cities, struggling to raise capital from traditional lenders, are turning instead to the capital markets for succour. The growth in the market for municipal debt is slow but sure, with many cities ganging together to issue debt in larger tranches, in the hopes of tapping more regional and global investors. So far, the plan is working, but what will the future hold?
The decline in bank lending has seen several new European municipalities start to plan their own funding agencies.
Eighteen months ago, Slovenia was staring down the barrel of a gun: its finances in shreds; its lame state-run banks facing either bailouts or bankruptcy. Ljubljana dodged a humiliating IMF bailout but only by pledging to flog poorly run state firms and by forming a national bad bank to house the largest three ropey state lenders. Since then its economy has sprung back to life, while government debt issuance in US dollars and euros have surged. Slovenia isn’t back yet – far more reform is needed – but the body and mind are willing.