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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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A US academic has suggested that credit rating agencies be paid partly in the bonds they have rated. This interesting take on the puzzle of how to maintain a viable rating system without perverse incentives has emerged from a casual private conversation. It shows that regulators need to take plenty of time and leave no stone unturned in considering how to reform the rating agencies.
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Spreads on Turkish debt have been knocked wider and investors unsettled. Why? This time it is not bad news on the economic front, but the ugly reappearance of political instability, as the elected government is threatened, this time with a court case. Self-appointed guardians of Turkey’s secularism should understand: what the country needs is for the AKP government to get on with its job.
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Equity markets are often believed to move in a herd — either everything is going up or everything is falling. But the present phase bucks that trend. New equity issues are being launched, and meeting very different fates. Some are being welcomed as if it was a bull market; others have been turned away by a bearish response from investors. The moral is: at the moment, every deal has to prove itself.
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A US academic has suggested that credit rating agencies be paid partly in the bonds they have rated. This interesting take on the puzzle of how to maintain a viable rating system without perverse incentives has emerged from a casual private conversation. It shows that regulators need to take plenty of time and leave no stone unturned in considering how to reform the rating agencies.
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For months the biggest impediment to recovery in the structured credit market has not been investors’ fear of defaults, but their fear of short term mark-to-market losses if CDOs fall further in price. Big asset sales, such as UBS offloading $15bn of US mortgage paper to BlackRock, will do a great deal to restore confidence that there is a realistic bottom to the value of securities and that it may be safe to buy.
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The remarkable recovery in US and European credit markets in the past month is not justifiable by any good news or fundamental change. Investors and dealers are now treating the glass as half full rather than half empty — but they should watch out. There is plenty more bad news to come, such as Alt-A defaults, and CDS indices and bond prices could turn bearish again.