Send us a text

◆ Did we come close to a full blown crisis before Trump's tariff climbdown? 
◆ Will we face another in 90 days' time? 
◆ UK regulator's astonishing covered bond ruling

We looked this week into whether the US's decision to postpone the imposition of punishing tariffs by 90 days averted a financial crisis, or merely postponed it.

The action in the US Treasury market was not good this week as investors and traders appeared to pile into cash rather than assets. Stock markets were red but the US government bond market caught no safe haven bid and sold off too. 

The peril abated with the tariff postponement on Wednesday but there were signs of a brewing crisis in the run-up to that decision. We ask whether markets will be better prepared in July if the US goes ahead with its trade policy.

We also delve into a decision by the UK regulator, the Prudential Regulation Authority, to disallow non-UK covered bonds from counting as high quality liquid assets for UK banks. We explore the ramifications for UK lenders and the covered bond market.

Send us a text

◆ How US tariffs will affect bond issuers in the medium and long term
◆ Liberation Day: your funniest quotes 
◆ A funding update from KfW's head of capital markets, Petra Wehlert

US president Donald Trump's imposition of a vast swathe of tariffs on imports bludgeoned stock markets this week and proved the stuff of nightmares for investors as they contemplated the possibility of recession and the return of inflation.

But the reality for the bond market will likely be rather more nuanced. We picked our way through Europe's investment grade corporate and financial institution bond markets to see what "Liberation Day" will mean for credit issuers' immediate deal pipelines and the longer term.

We also discussed the ramifications for the many varied economies and borrowers in the CEEMEA region as we followed the trail of cause and effect from the Oval Office to South Africa and Romania, and via China to Nigeria and Saudi Arabia.

Send us a text

◆ Farewell, KommuneKredit ◆ Covered bonds advance on SSAs’ territory ◆ Ivory Coast makes funding breakthrough ◆ Romania’s risks

Genuinely useful applications of AI are still rare in capital markets, but UniCredit has come up with an intriguing one. It has built a tool called DealSync that is helping it generate M&A mandates.
The supranational, sovereign and agency bond market was shocked on Wednesday to learn that it would be losing a well known issuer, KommuneKredit. The Danish government has decided it will be cheaper to just issue bonds itself. Could other agencies disappear?
Covered bond spreads have been getting tighter and tighter, while SSA spreads are widening. Might covered bonds actually start pricing inside some of the best public sector issuers such as German states or Dutch agencies?
In emerging markets, heavy issuer Romania’s dual tranche bond this week went well, but there were telltale signs of the funding stress the country could face if it does not resolve its political difficulties and huge budget deficit.
Ivory Coast has a better story to tell — it has become only the second African country to issue an international bond in its domestic currency. This funding technique, widely used in Latin America and central Asia, holds out hope of reducing African countries’ need to borrow riskily in hard currency, exposing themselves to FX risk.

Send us a text

◆ UK fires starting pistol on digital Gilts ◆ SSA market absorbs EU defence funding detail ◆ Credit issuers adjust tactics

The UK has begun a consultation as it looks to issue its first digital Gilt - to be called a DiGit. We discuss what the bond will look like and the UK's route to issuance.

Elsewhere in the SSA bond market, participants took stock of further detail on how the EU plans to fund its Security Action for Europe (SAFE) scheme. We examine the details and the bond market's reaction.

We also revisit the primary credit market where things were starting to turn for the worse last week to see if FIG and corporate issuers have found a way to keep investors happy.

And finally, we bring news of a brand new data product for the medium term note market from GlobalCapital.

Now read on:

UK sets fast pace for digital Gilt, hoping to catch up on DLT

Ipsen blowout lays blueprint for corporate blockbusters

FIG issuers increase new issue premiums to boost volumes

SSA market ‘still unclear’ how EU's joint defence funding could work

EGB market grapples with European rearmament plans

Send us a text

◆ DOGE threatens US CMBS recovery 
◆ Drill, baby, drill? Borrow, habibi, borrow 
◆ Cracks appear in European credit market

Just when you thought it was safe to go back into the office... or rather back into commercial mortgage backed securities with offices as the collateral.

No sooner has the US CMBS revival begun than US president Donald Trump's administration threatens to ruin it. The Department of Government Efficiency (DOGE) spearheaded by Elon Musk is ripping up government office leases . We explain how that could hurt the CMBS market.

In the Middle East, a falling oil price has set investors and bankers wondering about how much more borrowers from the region — especially Saudi Arabia — will need from the bond market this year.

Cracks are also starting to appear in Europe's previously buoyant credit market. We look at where to find the fissures and how issuers can bridge them.

Send us a text

◆ EU puts forward €800bn plan◆ Germany screeches into U-turn on debt brake ◆ Bund yield soars 40bp

The spectre of European countries needing to massively increase spending on defence has haunted the capital markets ever since it became clear that US president Donald Trump was really thinking of drastically weakening US military support to Europe.

It had already triggered a sell-off in European government bonds. But this week a vague expectation got some concrete numbers. Germany’s CDU, likely to lead the next government, has turned 180° and struck a deal with the SPD to make huge exceptions to the constitutional debt brake, including €500bn for infrastructure.

Germany’s 10 year bond yield made its biggest leap for decades on Wednesday, but then stabilised, suggesting the market now knows how big the issue is and can digest it.

Meanwhile the EU has also got on the front foot, announcing an €800bn ReArm Europe plan including €150bn of new joint borrowing.

We explore the results for the supranational, sovereign and agency bond market and for central and east European governments, where the security and fiscal concerns are keenest.

Send us a text

◆ Rob Murray, the Defence, Security and Resilience Bank's creator, explains all 
◆ Why US must be involved 
◆ Three point strategy to augment defence spending

The idea of a new multilateral bank to help fund defence spending in Europe has shifted to the fore in recent weeks. 

European leaders are understood to be discussing the idea this week and a plan for one could be announced soon.

Rob Murray, a former British army officer, is the person who first came up with an idea while working at Nato in 2018. He joined the podcast this week to discuss how it would work, the three things it would do that no other institution could do as well, and who would be part of it.

Send us a text

◆ German and European spending needs rile SSA market 
◆ GSE reform in the US, green reform in the EU 
◆ Saudi Arabia leads Gulf diversification out of dollars

New German chancellor Friedrich Merz has a lot to tackle when he finally forms his coalition government. Much of it will involve spending more money, which has bond investors on alert for higher borrowing needs.

LBBW's chief economist Moritz Kraemer told a conference in Frankfurt this week that he believes there are five factors dogging the German economy. We discuss what they are, what Merz can do about them and how this is affecting the SSA bond market.

The reform of Freddie Mac and Fannie Mae is on the minds of those in the US securitization market. We delve into whether the pair could or should be put back into private hands after almost 17 years of government conservatorship.

The EU looks set to ease some recently imposed ESG regulations. We ask if the bloc risks relinquishing its leading position in green finance.

Finally, we look into a landmark deal from Saudi Arabia, which is part of a developing trend among Gulf issuers to diversify their bond issuance.

Send us a text

◆ German poll to have far-reaching consequences for bond market 
◆ UK water sector's capital markets tangle 
◆ Corporate issuance picks up in emerging markets

Germany votes this weekend in a general election. Whatever the resulting coalition, fiscal matters will be top of their agenda. With the pressure on to raise defence spending but with the constraints of the country's debt brake to tackle, the strain is already showing in the bond market before a vote has been counted.

The UK water regulator has set out the conditions under which the 10 utilities it governs must operate. But this is a troubled sector of the UK economy and downgrades have been rife. We pick apart these companies' access to capital markets and how well they can raise the funding they need even as one teeters on the brink of default.

Meanwhile, corporate bond issuance in the emerging markets has been shrinking for years. But there are signs of a turnaround. We examine who is issuing and why.

Send us a text

◆ Using the bond market to boost European security 
◆ Africa nears sovereign debt stabiliser 
◆ Sterling's ESG problem

With the new US government reasserting its belief that Europe needs to provide more of its own security this week, attention has turned once again to how to pay for it.

We discuss the various ideas in play, from setting up a new multilateral development bank to retooling existing SSA borrowers for the purpose, examining the pros and cons of each.

Meanwhile, the African Union may be about to bring to fruition a sovereign debt stability mechanism. Africa is the only continent without one and proponents believe it will ultimately bring down borrowing costs for issuers as well as offering an alternative source of ready capital in a crisis. We delve into how the entity will work.

Finally, we have been investigating why the UK bond market lags others when it comes to ESG labelled bonds and question whether the government and regulators should do more to encourage issuance.