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Premiums may not be at risk of increasing yet but caution should remain the watchword
It will be better for all in the long run if Venezuela can prioritise domestic spending over debt repayments
The rollover risks sovereigns are accepting in exchange for cheaper funding
It's not the juniors in capital markets who need protecting from obsolescence. They stand to benefit most from the deployment of AI
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Hank Paulson’s rescue plan for Fannie Mae and Freddie Mac shores up the companies and their combined $5.2tr balance sheets, allowing them to soldier on through the US housing crisis. But equity investors don’t like it — punishing the firms with another 30% cut in their share prices today — which sets the scene for a battle over the agencies’ mandates and ownership. Muddling through is the order of the day and only when the smoke clears should radical changes be considered.
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That BG Group looks set to raise all its $14bn acquisition loan with just a one year maturity (plus a one year extension option) shows just how much in favour short term debt is in the loan market. Anxious banks do not want to bind themselves for too long to pricing that may become uneconomic if their own spreads widen again. Fortunately, what is good for the banks can occasionally be good for borrowers too.
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Trying to make sense of the Chinese government’s liberalisation plans for its domestic capital markets can be tough. But the recent message is crystal clear and is likely to disappoint bankers hoping for more deals: controlling inflation takes precedence over developing the market.
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2008 will be remembered with a shiver by many in fixed income as a year of frightening turbulence. But it will also come to be remembered as a watershed. The large number of high profile departures from the market — for a wide variety of reasons — will mean that when the storm clouds clear, the Eurobond market will be in the hands of a new generation of bankers.
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A group of trade associations for the European securitisation industry has presented a string of initiatives to the European Commission, aimed at increasing market transparency. Unfortunately, the most important recommendation — making investors assess and value deals independently — will be almost impossible to implement or enforce.
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Banks are preparing to introduce to Europe’s syndicated loan market a new technique from the US — linking loan pricing to CDS spreads at the time of drawdown. This would go even further than the bond market in making pricing market-driven. If borrowers object to this as potentially volatile and unpredictable, they will have to stand their ground and fight.