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The European Stability Mechanism’s entry as a short term debt investor later this month is likely to push already low yields down even further. With money market funds struggling in this environment, more could close — leaving issuers with a diminished natural investor base.
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European issuers have lunged into tier two issuance in recent months, satisfying both a bid for yieldy paper and an urgent need for capital. But while deals will continue to tick over, a return to pre-crisis levels of supply is still some way off.
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The ghostly form of the UK’s small business development bank is becoming visible. One can guess how it might work. But government rhetoric that it will unlock a dammed flood of credit to thirsty Bill Gates types is misleading. Modest and careful assistance can help SMEs. Thinking of this as a macro stimulus splurge will end in tears.
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A disappointing Pfandbrief on Tuesday may be the signal that the dash for core assets might have run its course. Whatever the news on Spanish banks later this week, peripheral and unloved sectors like ABS might be ripe for a rush of buying.
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Periphery eurozone banks are back in the public bond mix as investors start to look down the credit curve. With private placement investors beginning to follow suit, issuers should consider the advantages of going private.
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Having the European Central Bank as the single supervisor for the continent’s financial institutions will make little real difference to the way banks are scrutinised. But plans for banking union are still a good thing.
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Anshu Jain, Deutsche’s new co-CEO, has a chance to be bold when he faces investors next week, writes David Rothnie. Cost savings and job cuts are likely to be top of his agenda.
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Plans for a UK version of KfW are intriguing, but the government is missing the point. British industry is not thirsting for cheaper funding or easy credit. What a properly run small business bank could bring to Britain is something much more valuable.
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Santander drew criticism last week for the way it has tackled its sub debt buyback. But its actions were hardly out of character. And anyone desperate for an exit will still welcome the opportunity.
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An overwhelming majority of investors believe that another LTRO is inevitable. The previous two interventions disrupted normal market operations. The ECB must tread carefully with its third.