Even before it has begun, the European Central Bank’s looming bond purchase programme has already distorted prices to such an extent that a variety of public sector issuers are being forced to rethink their borrowing strategies.
The European Central Bank will crank up its long-awaited quantitative easing programme in the coming days, injecting €60bn a month into already buoyant markets for bonds issued by sovereigns, supranationals and agencies, and asset-backed securities.
Argentina’s attempt to sell at least US$2bn of new Bonar 2024 bonds to non-US investors was abruptly interrupted last week when a US judge ordered banks managing the sale to produce documents and witnesses for a deposition on the deal.
Moody’s shocked bond investors last week with a surprise two-notch downgrade that put Brazilian oil company Petrobras in junk territory. The move was seen by some investors as overly assertive, leaving them to add exposure incrementally.
Euro-denominated emerging market sovereign issuance will soar to its highest levels ever on the back of the European Central Bank’s quantitative easing programme, as issuers outside the eurozone seek to take advantage of falling euro yields, according to bank analysts.
The Financial Conduct Authority will reveal in March whether new issuance of debt and equity will come under its competition review, a prospect that has set bankers’ nerves on edge.
Global borrowers are using cheaper pricing in the European leveraged loan market to increase the size of euro-denominated tranches and push down pricing on more expensive US dollar tranches as companies arbitrage the transatlantic markets to secure best pricing on large loans.
The US Federal Reserve is becoming concerned that rules designed to make the financial system safer may have inadvertently transferred risk from banks to investors.
State-owned investment fund 1Malaysia Development has reaffirmed plans to offload a stake in its power unit, hinting that the delayed IPO of the entity remains essential to the group’s efforts to reduce its debt burden.