Bonds

MODEST-sized bond offerings even in volatile countries such as Indonesia do not usually set tongues wagging. They are manufactured in droves on the financial equivalent of an assembly line. But a $110m offering by PT Pakuwon Jati Finance this month has provided a gripping insight into the audacity, if not recklessness, of emerging-market creditors.Pakuwon Jati is an unremarkable property developer. It earned $4m last year and has a market capitalisation on the Jakarta Stock Exchange of $106m. Like other developers, it has a thirst for capital and no qualms about borrowing. It is also subject to the risks common to ... [full story]

FEAR and greed are supposed to govern financial markets. Right now, investors seem far more like lumberjacks at an all-you-can-eat buffet than claustrophobes trapped in a lift. Despite nagging concerns about the American economy, global stockmarkets are at multi-year highs.Takeovers are booming and bankers on Wall Street and in London are counting on bumper bonuses. Even the influx of protectionists into America's Congress has been met, by and large, with a shrug.If there is one market that sums up the insouciant attitude to risk, it would have to be corporate debt. After an extremely good run, the difference between the ... [full story]

DON'T even think about it. That is the message from financial regulators to those tempted to manipulate the $4 trillion market in American government debt. This week it emerged that the Securities and Exchange Commission (SEC) had opened an investigation into the activities of treasury bond dealers at UBS, Europe's largest bank by assets. Another Swiss bank, Credit Suisse, is also in the spotlight after a bond trader left under a cloud.At least no one can say that they didn't see it coming. Regulators have been wagging their fingers for months. On September 27th James Clouse, a Treasury official, told ... [full story]

IT IS turning out to be a good month for America's bond market, and one or two of its most hoary gurus must be patting themselves on the back. A pause in the Federal Reserve's tightening cycle, after increases in 17 consecutive meetings, began to excite the market, sending Treasury prices higher and yields lower. Then came July's wholesale and retail inflation numbers, including a 0.2% increase in the closely watched core consumer-price index (CPI), the lowest for five months. Immediately after the data on August 16th, yields on ten-year Treasuries fell to a four-month low of 4.87%.Is this the ... [full story]

A RARELY mentioned irony of globalisation is that, whereas developed countries are sending more factories and call-centres East, Asia long ago outsourced its capital markets to the West. Asian countries have amassed some$2.73 trillion of foreign-exchange reserves, but rather than invest it in their own region, they have parked it abroad, largely in American Treasuries. As a plentiful pool of liquidity, these funds then find their way back into Asia via institutional portfolio flows and foreign-direct investment.Increasingly, Asia's politicians are asking whether this merry-go-round makes sense. South Korea's finance minister, Han Duck-soo, told a conference in London on May 24th ... [full story]

TOXIC, floorless and death spiral: all these descriptions make the risks of multi-strike convertible bonds(MSCBs) pretty plain. It's a shame that they don't seem to have been translated into Japanese. Japan's MSCB market has grown at a staggering rate. Only ¥48 billion ($410m) were issued in 2003, the market's first year. By last year the total had reached ¥1 trillion, reckons one Japanese securities firm. In other rich countries these bonds are, though legal, mercifully rare.MSCBs are corporate bonds that can be converted into new equity whenever the issuer's share price hits a target, or strike price, that varies daily, ... [full story]

AT FIRST glance, it has the hallmarks of a classic inflation scare. In the past week commodity prices from oil to orange juice, silver to sugar have reached eye-popping levels. In nominal terms, the prices of Brent crude, copper and zinc have hit record highs. Gold has topped $600 an ounce for the first time since 1980 and silver is at its dearest in a generation. Meanwhile, long-term nominal bond yields in America and elsewhere have risen to levels not seen in more than a year. On April 7th the yield on America's 30-year long bond climbed the 5% barrier, ... [full story]

FEW British companies look less vulnerable to takeover than Tesco, a supermarket chain that is no one's idea of a shrinking violet. Yet this week Tesco approached the bond markets with an unusual lure to creditors. Its long-term bonds included a covenant that would protect bondholders' interests in the unlikely event that Tesco is gobbled up.Bankers say it is not the first time that Tesco's bonds have included such a change of control clause. Other big companies, even if they seem just as safe as Tesco, are being pressed by creditors to follow its lead.There are two reasons why. First ... [full story]

YOU can safely assume that most Brazilians had more sensuous things on their mind on the last day of carnaval than their country's debt. But that didn't stop Standard & Poor's (S&P), a rating agency, creating a little stir of its own on February 28th, when it raised Brazil's foreign debt ratings to two notches below investment grade.In 2002, Brazil's most recent election year, S&P cut the country's ratings, causing havoc in financial markets. This time, with another election in sight, the markets had hoped for even higher marks. Their bullishness stems from a trend sweeping Latin America, which rating ... [full story]

TRADERS of the long bond have felt emasculated since America's Treasury stopped selling its 30-year paper in October 2001. Men (and most were men) with accents as broad as the Hudson River used to boast of the clout the benchmark bond gave them. These capital-market vigilantes liked to think that they had forced Bill Clinton into his successful deficit-busting programme in the early1990s. Less than a decade later, they fell victim to their own success. The Bush administration, claiming that the good order of America's public finances had made the market illiquid, suspended 30-year issues. On February9th, however, the long ... [full story]