Investment Grade

70% Of German Bonds Are No Longer Eligible For ECB Purchases

The surge in sovereign debt since Britain’s vote to exit the European Union last month has pushed yields on about 70% of the securities in the $1.1-trillion Bloomberg Germany Sovereign Bond Index below the ECB’s -0.4% deposit rate, making them ineligible for the institution’s quantitative-easing program. For the euro area as a whole, the total rises to almost $2 trillion.

With Over $13 Trillion In Negative-Yielding Debt, This Is The Pain A 1% Spike In Rates Would Inflict

There is now $13 trillion of global negative-yielding debt. And, as the WSJ writes, even a small increase in interest rates could inflict hefty losses on investors. With the 2013 "taper tantrum" the Fed sparked a selloff as it discussed ending its bond-buying program known as quantitative easing. A repeat "would be very painful for a lot of people" said J.P. Morgan. This is just how painful.

The Reason For The Relentless Scramble For US Corporate Debt In One Chart

While the $5.9tr US IG corporate bond market represents only 12% of that global market, it is now responsible for 33.0% of its total (effective) yield payment. In other words, nearly one in three (global) dollars paid out in the global IG broad market is paid to investors in the US IG corporate bond market.

"I've Never Felt So Resigned To The Fact That We Are All Stuck..."

"I’ve never felt so ... resigned ... to the fact we are ALL well and truly stuck. The Fed is stuck. The ECB and the BOJ are stuck. The banks are stuck. Corporations are stuck. Asset managers are stuck. Financial advisors are stuck. Investors are stuck. Republicans are stuck. Democrats are stuck. We are all stuck in a very powerful political equilibrium where the costs of changing our current bleak course of ineffective monetary policy and counter-productive regulatory policy are so astronomical that The Powers That Be have no alternative but to continue with what they know full well isn’t working."

Forget Brexit, It's The Banks Stupid!

Political instability for the EU is a significant and visible threat, but is not the immediate problem, which is financial. As a result of savings and spending imbalances, none of the core Eurozone states can stand on their own.

Royal Mint Allows British Pensioners To 'Save' In Gold Bullion

Given the current uncertainty surrounding Brexit, the news this week that Britain's Royal Mint will join the current providers of gold to self-invested pension savers in the UK (SIPPS) - allowing British pensioners a tax efficient way of investing in bullion - is fascinating. While gold bullion has been allowed in SIPPs since 2006, this is the first time the Royal Mint has allowed its higher-quality bullion to be bought for pensions.

Mario Draghi Is Now Buying Junk Bonds

A few days after the ECB unexpectedly announced its CSPP, or corporate bond buying program which based on its definition was limited to investment grade, non-financial debt, we explained "Why The ECB Will Be Forced To Buy Junk Bonds", saying that "the EU corporate sector’s penchant for bond buybacks may ultimately force Draghi further down the ratings ladder lest the ECB should end up entangled tender offers or else end up without enough debt to monetize." This was confirmed on the very first day of the ECB's bond purchases.

These Are The Bonds The ECB Is Now Buying

Today is a historic day for the corporate bond market: with the launch of the ECB's CSPP, Mario Draghi is now directly buying European investment grade non-financial bonds. This means that no longer will European corporate bonds trade based on their fundamentals, but purely on expectations of frontrunning future ECB purchases, such as the following...

Bill Gross Explains Why He Is Now Shorting Credit

"For over 40 years, asset returns and alpha generation from penthouse investment managers have been materially aided by declines in interest rates, trade globalization, and an enormous expansion of credit – that is debt. Those trends are coming to an end.... A repeat performance is not only unlikely, it  is impossible unless you are a friend of Elon Musk and you’ve got the gumption to blast off  for Mars. Planet Earth does not offer such opportunities."

The "Crazy Growth In Corporate Debt" Is Finally Noticed: Bloomberg Issues Stark Warning

One does not have to be financial wizard to to know that a firm which has to borrow more than it can generate from core operations is not a sustainable business model, and yet today's CFOs, pundits and central bankers do not. But more are starting to pay attention as the corporate debt pile hits epic proportions. As Bloomberg writes this morning, when it also issued a stark warning about the next source of credit contagion, while "consumers were the Achilles’ heel of the U.S. economy in the run-up to the last recession. This time, companies may play that role."