Monthly Archives: July 2014

The Outlook for Emerging Market Bonds

Emerging market sovereign bonds that are issued in local currencies are supported by high real yields and improving credit quality. In addition, their risk-to-reward profile is enhanced by declining currency volatility and a positive long-term outlook for currency appreciation. This article explains why local currency emerging market bonds are attractive relative to historical valuation levels as well as current developed market opportunities.


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BIS detects early ‘worrying signals’ from credit booms

* Early warning indicators show “worrying” signs – BIS

* Credit-to-GDP gap points to risks in many countries

(Reuters) – Regulators should not dismiss “worrying” early signs of unsustainable property price and credit growth, which could leave borrowers vulnerable to interest rate rises or sharp downturns, the BIS said on Sunday.

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Live webinar : IFRS 9 Financial Instruments, 29th July

On 29 July 2014 IASB members and staff will give a live web presentation on IFRS 9 Financial Instruments including a question and answer session.

For the convenience of those in different time zones, the presentation will be held twice—once in the morning and once in the afternoon.

The presentation and the question and answer sessions will be recorded and made available on the project website as soon as possible.

Register to participate

Each presentation, including the question and answer session, will last approximately 40 minutes. There is no charge to listen to the web presentation, but you need to register. You can do this now or any time before the presentation. If you register now, the provider will automatically remind you of the presentation nearer the time.

The web presentations will take place:

29 July 2014 – 10.00 (London time)
Web registration—register here.

29 July 2014 – 14.00 (London time)
Web registration—register here.

Technical information

Your computer must allow pop-ups. If necessary, please contact your technical department for information.

To access the presentation your computer must have Windows Media Player or RealPlayer installed.

For technical questions, please contact Bob Young on +44 (0)20 7246 6444.

Crisil Outlook : Of growth & missed opportunity

CRISIL has released a report, ‘Of Growth and Missed Opportunity’, which throws light on the implications of high and low growth. India witnessed an eight-year spell of near 9% GDP growth between fiscals 2004 and 2011, with the global financial crisis interjecting in 2009. While growth has since dropped below 5% things seem to be turning around. We believe India could now average 6.5% over the next five years, but a return to 9% growth levels is not on the horizon.

This report looks at the difference 9% growth makes compared with our 6.5% baseline call and an unseemly 5%. It shows the tangible benefits in terms of goods sold, jobs created and poverty reduced under the three scenarios. For example, 9% growth would mean 49 million less Indians below the poverty line and 10 million more two-wheeler purchases, compared to the scenario of 6.5% growth.

Policymakers and business leaders will find the equations handy when initiating remedial action.

Full report at :

ISDA News : Protection Racket

May 19, 2014

Protection Racket

How many times have you read a story in a newspaper or magazine and thought, “The headline is pretty negative, but the story is OK”?

We thought (and hoped) that might be the case when we came across a New York Times Dealbook piece that has this alarming headline: “Derivatives Markets Growing Again, with Few New Protections”.

But we were wrong. Here’s why…

 Click to read the full media.comment story

High Yield Bonds: Can more juice get squeezed out of the junk bond sector?

Posted: 20 Jun 2014 10:54 AM PDT

Lipper reports high yield bond funds have seen the first cash outflow in 7 weeks which might be a sign that junk bonds could run out of gas. Over the last five years the S&P U.S. Issued High Yield Corporate Bond Index has seen annualized returns of over 13.6%. Year to date the index has returned 5.43% as yields have ended at 4.84% impacted by a 55bp drop since year end. By comparison, safer 10 year US Treasury bonds have seen yields drop by 40bps and have returned 5.17% year to date. Can more juice get squeezed out of the junk bond sector? Looking at incremental yields of different asset classes can be revealing: The yield of the S&P U.S. Issued High Yield Corporate Bond Index is 4.84% or 203bps higher yield than investment grade corporate bonds. This is the lowest spread differential seen during the last two and half years of quantitative easing. During that time this spread has gotten as high as 317bps in June 2013. High yield bonds are now only 221bps higher in yield than yield of the 10 year U.S. Treasury bonds. High yield bonds are only 61bps higher in yield than the yield on senior loans tracked in the S&P/LSTA U.S. Leveraged Loan 100 Index. High yield bonds are 135bps lower in yield than the yield of high yield municipal bonds tracked in the S&P Municipal Bond High Yield Index

Standard & Poor’s Expects $6.6 Trillion In New Corporate Bond Issuance Over The Next Five Years

We project nonfinancial corporate borrowers in Asia, Europe, Latin America, and North America will seek up to $21.7 trillion debt finance to support growth (excluding refinancing) over the five years to 2018, of which $6.6 trillion will be new bonds and other debt securities. In fact, borrowers could well exceed that total, as nonfinancial companies issued $688 billion in bonds through May 2014. Since the Great Recession, corporates globally (with the exception of deflationary Japan) have turned to the debt capital markets to raise financing. Except for Japan, the stock of debt security financing was between one-quarter and one-half as much in percentage terms in 2013 compared with five years before. Corporate borrowers tapped the debt markets to such an extent because of yield-seeking investor demand contributing to lucrative credit terms, combined with constrained bank loan supply.

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S&P : Global Oil & Gas: Emerging Market Players Are Pushing Themselves Into The Limelight

In this report, Standard & Poor’s Ratings Services takes a global look at the issuers we rate in the global oil & gas sector, integrating a series of new developments in the industry, coming just after we have implemented our newly revised criteria for rating corporate issuers, published on Nov. 19, 2013. Four recently published Key Credit Factor articles also spell out our approach to rating subsectors in the oil & gas field.

With this article we aim to achieve three things: 1. Provide our analytical views on key issues in the sector: developments in emerging markets developments and the outlook for capital spending. 2. For the first time show a global list of selected issuers scored under the new criteria by subsector, together with an outlook snapshot for each subsector. 3. Produce an analysis of 301 global rated oil & gas issuers’ compounded scores to demonstrate their distribution and show which factors tend to have a higher impact on ratings for the sector than others.

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Live Webinar – Taking a Long view in a short-term world : Pension Management, July 24, 1130pm

Thu Jul, 24 2014 11:30 PM IST — Fri Jul, 25 2014 12:45 AM IST

View/Register now

Some of the topics that will be covered include: Developing global strategy: Avoiding crowded markets and going where the opportunity is next; Looking for profitable ways to contribute to solutions to big societal questions; Focusing relentlessly on return on risk and ignoring asset class silos.



Corporate Bonds: Spotlight on ESG Risks

Interest is rising among credit investors in exploring environmental, social and governance (ESG) factors and the impacts they might have on corporate creditworthiness.
Institutional investors are applying strategies from other asset classes, looking at investments through an increasingly long-term lens, and, most importantly, responding to client demand for enhanced ESG analysis. They are starting to consider ESG factors as leading indicators of credit quality and returns. This report — developed with the PRI’s
Corporate Fixed Income Working Group — explores the case for corporate fixed income investors to consider ESG factors in their investment decisions.

Read the full publication here

Covered Bond News: Global Covered Bond Characteristics And Rating Summary Q2 2014

The Q2 2014 Global Covered Bond Characteristics And Rating Summary publication is now available. This article provides Standard & Poor’s Ratings Services’ assessment of the characteristics and risk indicators of the listed covered bond programs that contribute to its rating opinion.

Global Covered Bond Characteristics And Rating Summary Q2 2014

Bonds Will Need to Tread Lightly With Domestic And Global Issues

Last week saw the yield of the S&P/BGCantor Current 10 Year U.S. Treasury Bond Index close 1 basis point tighter than the 2.61% that started its week.  Thursday was the only day in which the yield moved significantly as yields tightened by 5 basis points in reaction to the weaker than expected Retail Sales release.  Treasury bond prices were stronger for the Monday opening as increasing tensions over the latest Iraq situation have bumped up demand for quality assets.  In reaction to the situation that has been steadily increasing, oil prices were the early mover as the S&P GSCI All Crude (TR) Index saw its largest year-to-date one day jump of 2.39% last Thursday and returned 4.21% for the week.  A full-on flight to safety trade has not started given the current political situation though with the suspected number of short market trades in place, if an unwinding trade were required it could have a quick and strong impact to rates.  Like the Ukraine crisis, investors wait and watch to see the level of involvement required by foreign governments. In addition to keeping an eye on the Middle East, the forward U.S. economic calendar contains some key indicators.  Today kicked off with the Empire State Manufacturing Survey stronger than expected reporting 19.28 versus the expected 15.0.  Industrial Production month-over-month for May also was higher than the surveyed level of 0.5% at a 0.6%.  Though today’s manufacturing and production results were muted by an announcement by the IMF (International Monetary Fund) that its U.S. growth forecast had been cut.  Anticipation awaits the release of U.S. CPI on Tuesday which is expected to be a 0.2% month-over-month.  This indicator has been on the rise since February’s 0.10%.  Year-over-year is currently at 2% and if higher could indicate that inflation is accelerating faster than the Fed anticipated.  Housing Starts (1029k, expected) and Building Permits (1050k exp.) will also be released on Wednesday.  The end of the week has the largest potential to impact the markets as the Fed will conclude its meetings with its FOMC Rates Decision on Thursday.  This coupled with Friday’s Initial Jobless Claims (2600k, exp.), the Philly Fed Business Outlook (14 exp.) and May’s Leading Indicators Index (0.6% exp. vs. 0.4% prior) makes for a hectic week. The S&P U.S. Issued High Yield Corporate Bond Index continued to outpace its investment grade counterpart by closing the week with a return of 0.25% for a year-to-date return of 5.15%.  New Issuance also continued at a healthy pace as issuance in names such as DaVita Healthcare, Ferrellgas, Gibson Energy, iStar Financial and Virgolino de Oliveira Finance came to market. The investment grade segment of the corporate bond market also saw a significant number of new issue deals in household names such as Citigroup, Home Depot, John Deere, Johnson Controls and New York Life.  The S&P U.S. Issued Investment Grade Corporate Bond Index returned 0.11% for the week which helped whittle down the negative month-to-date return of -0.61%.  Year-to-date the index has returned […]


S&P : Bond Upgrade Potential In Emerging And Developed Markets, Including The U.S. And Europe: The Total Increases For The Sixth Consecutive Month

The number of entities poised for upgrades has increased for the sixth consecutive month, rising to 295 as of May 30, 2014, from 278 a month earlier. The gap between the potential upgrades and potential downgrades narrowed in May because the number of potential downgrades declined significantly, to 502 from 530, while the number of potential upgrades increased to 295 from 278. Moreover, the forest products and building materials, transportation, and homebuilders and real estate companies sectors all show higher upgrade potential than they have historically. We define potential upgrades as issuers that Standard & Poor’s Ratings Services rates ‘AA+’ to ‘B-‘ with either positive rating outlooks or ratings on CreditWatch with positive implications. We closely monitor potential upgrades as these companies are the most likely to be upgraded in the short-to-medium term, and their aggregate number points to the direction of potential rating changes. Ongoing surveillance of these issuers can be valuable to investors in their sector credit allocation process.

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S&P : Bond Markets Bankroll Corporate Balance Sheets

While economies around the globe are in varying stages of recovery, generally faster growth is expected in the coming years. This expected pickup in economic activity will likely keep new bond issuance robust and investor demand healthy. The low default environment has reinforced investor interest in the bond markets, as has the continued quest for better yielding securities. Moreover, given the still favorable conditions, strong refinancing and prefinancing activity will likely continue, even as the wave of activity completed in recent years might temper the pace.

S&P Credit Shift: As Global Corporate Borrowers Seek $60 Trillion, Asia-Pacific Debt Will Overtake U.S. And Europe Combined

The emergence of China as the biggest debt market, gradual disintermediation of banks, faster debt growth in sectors benefitting from the rising global middle class, and an aging world population have resulted in major credit shifts in nonfinancial corporate debt issuance since the 2008 recession. We expect these shifts to continue through the next five years, as corporate issuers will likely seek up to $60 trillion in new debt and refinancing through 2018, an increase from an estimated $53 trillion last year. (Watch the related CreditMatters TV segment titled “Asia-Pacific’s Debt Will Outpace The U.S. And Eurozone As Global Funding Demand Rises,” dated June 16, 2014.)

Corporate credit globally has approached an inflection point as the center of gravity shifts to the Asia-Pacific region. Corporate debt in the region, particularly from China, will exceed that of North America and Europe combined by 2016. We believe this will lead to an overall increase in risk, since the credit quality of corporate borrowers in Asia-Pacific is generally lower than in North America and Europe. Consequently, without improved risk assessment among investors and a heightened awareness by regulators of contagion risk, some future financial stress could stem from Asia.

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Kamakura Reports Slight Decline in Corporate Credit Quality in June:

NEW YORK, July 2, 2014: Kamakura Corporation reported Tuesday that the Kamakura troubled company index ended the month of June at 4.45%, a one month increase of 0.13%. The index reflects the percentage of the Kamakura 34,000 public firm universe that has a default probability over 1.00%. An increase in the index reflects declining credit quality while a decrease reflects improving credit quality.

As of the end of June, the percentage of the global corporate universe with default probabilities between 1% and 5% was 3.61%, an increase of 0.03%; the percentage of the universe with default probabilities between 5% and 10% was 0.56%, an increase of 0.07%; the percentage between 10% and 20% was 0.20%, unchanged from the prior month; while the percentage of companies with default probabilities over 20% was 0.08%, an increase of 0.03%. The index hit an intra-month high of 4.45% on June25th, while the intra-month low of 4.17% was on June 19th.

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S&P Video :: Asia-Pacific’s Debt Will Outpace The U.S. And Eurozone As Global Funding Demand Rises

Global corporate issuers will seek an estimated $60 trillion in new and refinanced debt by 2018 due to a rising middle class and an aging population. Asia-Pacific, including China, will account for about one-half of that demand, outpacing the U.S. and Europe combined. In this CreditMatters TV…

See Video 

Save-the-Date Invitation: Moody’s & ICRA Teleconference: India Budget 2015, 15 July 2014

Moody’s & ICRA Teleconference

India Budget 2015


Tuesday, 15 July 2014

14:00 India / 16:30 Hong Kong / 17:30 Tokyo

To register, please click here.

Program details and final invitation will follow closer to the events.


Analysts from Moody’s and ICRA’s Banking, Corporate and Infrastructure Finance Group will be available for Q&A.