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M&G
Friday 3 February 2023
Finessing the corporate structure: investor concern leads to bond volatility

Financial Distress and the Itch for Corporates to “Finesse the Corporate Structure” – Part I:.. Financial Distress and the Itch for Corporates to “Finesse the Corporate Structure” – Part I: Unrestricting and Transferring Assets

With the macroeconomic outlook uncertain on elevated inflation and recessionary fears, companies are feeling the stress as growth expectations are tapered, margins are pressured and refinancing ability gets called into question. Even more troublesome, lower-rated companies with floating-rate instruments will experience higher borrowing costs.

Uncle Jim's World of Bonds

There is nothing more fascinating than a fixed income instrument. Nothing. Listen to Jim transport you to a world of convexity, basis points, covenants and debt-to-gdp.

There is nothing more fascinating than a fixed income instrument. Nothing. Listen to Jim transport you to a world of convexity, basis points, covenants and debt-to-gdp.

January 2023

Capital Structure Gymnastics: valuing the equity of stressed credits using option maths

“It’s option value” – A frequent refrain by credit analysts explaining why the market ascribes varying levels of equity value to companies with debt trading at severely stressed levels. Cryptocurrency exchange Coinbase, for example, has unsecured debt trading close to 50% (c.$3.7bn outstanding), yet still has a market cap of $8.8bn; outdoor advertiser Clear Channel Outdoors has unsecured debt around 70% (c.$7.17bn outstanding), yet has a market cap of just $580mn.

Housing market timebomb – is Sweden just the start?

Housing market woes became a hot topic in 2022, with interest-rate hikes meant to combat accelerating inflation putting pressure on house prices globally. Combined with high starting levels for property values after the post-pandemic housing boom, many are predicting further declines going into 2023. Real estate downturns (defined as two consecutive quarters of falling prices) have been triggered in a number of economies including Canada, Australia, New Zealand and the Nordics.
One area where this trend is playing out most rapidly is Sweden, where house prices are falling at one of the fastest rates in the world.

December 2022

‘A Nation Deep in Debt’ – the podcast

If you don’t get the books you want on Christmas Day, and you’ve already seen Love Actually, I recommend taking a listen to these ‘A Long Time in Finance’ podcasts by Jonathan Ford and Neil Collins.  

Inflation’s final destination

The Fed remains hawkish relative to the market, once again stating that rates are going higher than markets have priced, and that rates will stay there for longer than priced, so as to bring inflation back down ‘towards 2%’. It expects growth to be lower, and it expects inflation and unemployment to be higher than it previously expected. In short, recent moves lower in yields and risk premia are loosening financial conditions and this may well require, in the Fed’s eyes, tighter policy for longer.

Gulf banks – how do they score on ESG?

The World Cup in Qatar has been a highly emotive affair, both on and off the field. The football has offered shocks (Saudi Arabia’s victory over Argentina), joy (Morocco becoming the first African country to reach the semi-finals) and bafflement (Mr Sampaio’s eyebrow-raising refereeing performance in England vs France) in equal measure. Away from the sporting action, a similar level of drama has surrounded the host nation, which has faced a barrage of ESG-related questions around its social and environmental standards. We thought that this would therefore be a good time to offer a view on how Gulf Cooperation Council (GCC) banks – including a couple of Qatari lenders – are faring when viewed from an ESG perspective.

Remittances: A foreign exchange boost for emerging and frontier markets

Most emerging and frontier economies get a welcome boost from worker remittances. Such flows supplement foreign exchange earnings as much as foreign direct investment (FDI), and are many times greater than overseas development aid. Remittances have a key role to play in financing the sustainable development goals (SDG) and with efforts to maintain debt sustainability.

The emerging market exceptionalism story in early 2000s was in part premised on rapid FDI growth.

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