Hanging on

The result is certainly diverting but not entirely confidence inducing. Take the struggles of Europe’s financial minds to build credible and workable regulation to enable the stress tests that were seen as crucial to stabilising the eurozone banking sector. If this was a lesson in policymaking, it fell well short of textbook, moving from the hapless Committee of European Banking Supervisors through the European Banking Authority to the European Central Bank. Central banks and regulators have also struggled to talk the same language in the...

A recent research report from Royal Bank fo Scotland makes grim reading. “The credit liquidity trap” points out that a European corporate bond issue now trades on average once a day by volume versus nearly five times a day just over a decade ago. It is no better in the US, where corporate bond trading volumes relative to the size of the market have been on a steady downward trend since 2005 and the US Securities and Exchange Commission shows that nearly 20% of corporate bonds do not trade at all. Corroborating the gloom of recent research notes...

Mario Draghi is a fan of securitisation. At the rates meeting on June 5, the president of the European Central Bank not only cut interest rates, he backed these up with renewed forward guidance on interest rates and a series of measures of credit easing aimed at supporting lending to the non-financial sector. Securitisation is being heralded as a potential remedy for many ills, specifically as the Holy Grail of SME funding. With a touch of asperity, in the discussion after the rates announcement Draghi said: “We are working on the ABS, but...

European and US rates policies have not seen a marked divergence since 1997–98. At that time, higher rates in Europe than the US triggered a shift of activity into Europe. The possibility of a similarly dramatic outcome to expected rates divergence has triggered lively debate across financial markets. Whether things will pan out similarly, but in reverse, partly depends on the basis swap market. But for the SSA market specifically, few expect much drama. “Rising rates are not always disruptive to the SSA market because after a sell-off has...

One of the many causes of the crisis was the inadequate levels of capitalisation at the banks. A solution to this problem has been the development of a new generation of hybrid instruments, such as contingent capital – CoCos – debt instruments that are either written off or turned into equity when a certain trigger is hit. Essentially, CoCos increase a bank’s capital buffer at less expense than equity. They are structurally riskier than other non-equity capital instruments, even than their pre-crisis forebears. But there is nothing shady...

The tribal nature of the way institutions strategise and finally act, particularly at times of great crises, rarely seems to change. Past events inform current reasoning, which leads to future courses of action that seem perfectly rational. Sometimes this approach works. On other occasions it fails, for reasons that only become painfully clear in hindsight. For proof of this, take the various fumbles, failures and grand compromises suffered and sought in recent years by Western regulators, in an often-times vain effort to get their financial...

As it turned out, rumours of the financial death of the eurozone’s periphery were greatly exaggerated. A year ago, it was easier for the countries girding the single currency’s southern and western reaches to walk to the moon than to sell tranches of sovereign debt. Ireland, Portugal and Greece remained locked into their international bailout programmes; Spain’s banks were still being artificially bolstered by €41bn (US$54bn) of EU funds. How things change. Tick forward to the closing business months of 2014, and views from pweripheral eurozone...

The past year has seen frontier markets come of age as investors plough money into markets from Argentina to Nigeria to Vietnam, desperate for returns in the low to mid-teens. No single band of people better personify the contrarian human desire to overpower, tame and label than the explorer. From Magellan to Cook to Amundsen, history is littered with the brave and foolhardy, enduring the worst of the planet’s elements, then rushing home, like eager schoolboys, to give the rivers, mountains and gulfs of their conquered lands a name. So it is...

The hope in the region is that this bond market growth is representative of a more sophisticated mindset among issuers and investors. But there are fears that normalised Federal Reserve policy could end this golden era. “The end of quantitative easing in the US should have put pressure on Asian interest rates and foreign exchange. This view has been challenged by talk of European QE and resulting outflows from the euro into US dollars as well as Asian currencies,” said Herman van den Wall Bake, head of Asia-Pacific debt capital markets at...

While expectations of India’s new prime minister Narendra Modi were initially as sky-high as the rocket to Mars launched last year by the country’s space agency, reality is bringing them back down to earth. Stratospheric hopes of a radical economic transformation under the new leader, who took office in May with the strongest parliamentary majority in 30 years, are now being reined in. Early signs suggest that Modi is already sticking to what he is good at – delivery – and appears to be taking a long-term view of reform in Asia’s...

Banks bore the brunt of public ire, but the fallout from the events of late 2008 was ultimately just as grisly for credit rating agencies. Industry colossi Standard & Poor’s, Moody’s Investors Service and Fitch Ratings were, if not hobbled, then at least humbled. Why, investors, governments and regulators wanted to know, had CRAs not foreseen the destruction of so much hard economic work – and the onset of a recession from which many nations have yet to emerge – by a tiny slice of the financial sector? Since those dark days, much has changed in...

To see the digital version of this report, please click here. To purchase printed copies or a PDF of this report, please email gloria.balbastro@thomsonreuters.com. A quick glance at the headlines would lead to the natural conclusion that now is not the best possible time to invest in emerging markets. Escalating tensions in Russia and the Middle East, coupled with political changes in a host of key emerging markets, including Brazil, India and Indonesia, have ramped up the geopolitical risks. Meanwhile, regional blocs of countries that had...