Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Bonds’

Germany for First Time Sells 30-Year Bonds Offering Negative Yields

Posted by hkarner - 22. August 2019

Date: 21-08-2019
Source: The Wall Street Journal

Bond sale adds to the roughly $15 trillion of negative-yielding bonds outstanding world-wide

Germany sold 30-year bonds at a negative yield for the first time, in another sign of how investors’ desperation for safe assets is inflating their value.

The bond, set to mature in August 2050, has a zero coupon, which means it pays no interest at all. Yet investors were still willing to pay more than face value to buy €824 million ($914 million) worth of the debt, pushing the overall yield on the bond into negative territory, at minus 0.11%. Yields fall as bond prices rise.

The German sale adds to the roughly $15 trillion of negative-yielding bonds outstanding world-wide, many of which are from European governments or are state-sponsored agency bonds. It also adds to the smaller—but still significant—amount of new bonds that have been sold with a negative yield at issue.

More than $3 trillion of bonds have offered a negative yield when they were first sold since 2016, according to data from Barclays. While this is mostly government and agency debt, it also includes more than $11 billion of corporate debt, from companies such as French drugmaker Sanofi SA and German consumer-goods company Henkel AG.

The list of such bonds has even included euro-denominated debt from U.S. tobacco group Philip Morris International Inc., which sold €500 million of seven-year bonds at a yield of minus 0.18% at the end of July, according to Barclays data.

In the latest sale, Germany sold the bonds at an average price of 103.61. That means the government will pay back €795 million in 30 years’ time for the €824 million it has borrowed.

The last time Germany sold similarly long bonds was last month, when it tapped its outstanding August 2048 issue again, and investors bought the debt at a yield of 0.3%. The first sale of these bonds, in September 2017, achieved a yield of 1.3%.

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Investors Ponder Negative Bond Yields in the U.S.

Posted by hkarner - 13. August 2019

Date: 12-08-2019
Source: The Wall Street Journal

Last week’s slide in Treasury yields is deepening worries about lackluster growth, low inflation

A steep slide in U.S. government-bond yields last week wrong-footed investors and left some pondering what was once unthinkable: whether interest rates in America could one day turn negative.

Historically, people who lent money out got more money back later, a way to compensate for inflation, for the risk of not being repaid and for forgoing other investments.

Now, though, there is more than $15 trillion in government debt around the world with negative yields. That means, essentially, that savers holding these bonds are paying the government to store their money.

So far, the U.S. has avoided that fate. Less than a year ago, the Federal Reserve was hiking short-term interest rates, and investors were betting that yields—which rise when bond prices fall—on longer-term debt would continue climbing as U.S. growth showed signs of accelerating and as unemployment plumbed historic lows.

The trade dispute between the U.S. and China, slowing global growth and financial-market turmoil late last year changed that. The Fed pivoted in the beginning of 2019 and, late last month, cut short-term rates for the first time since 2008. Den Rest des Beitrags lesen »

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About to Retire? Check Your Stock Exposure—Quickly

Posted by hkarner - 6. August 2019

Date: 05-08-2019
Source: The Wall Street Journal

We ran a simulation showing how various portfolio allocations performed for someone who had retired in 2000—and it was revealing

There are a lot of people thinking of retiring now because the bull market has boosted their 401(k)s.

But they may need to re-evaluate their allocations. And quickly.

Over the past decade, the S&P 500 has returned more than 13% on an annualized basis. And studies show that this is exactly when a lot of people choose to retire—the height of a bull market, when their portfolio is plump.

But those same studies show that people who retire at bull-market peaks have a higher chance of running out of money. That is because they wrongly assume big returns will continue to pile up—and then they lose a big chunk of cash when bear markets arrive.

So, investors about to retire may want to re-evaluate how their money is allocated. To assist in that effort, we ran a simulation showing how various portfolio allocations performed for someone who had retired in 2000, the beginning of a bear market, followed by another later in the decade. Den Rest des Beitrags lesen »

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Lega-Chef Salvini will Parallelwährung in Italien

Posted by hkarner - 5. Juni 2019

Dominik Straub aus Rom, 3. Juni 2019, 09:00 derstandard.at

Partei fordert Ausgabe staatlicher Schuldtitel in kleiner Stückelung – diese könnten den Euroaustritt einleiten, warnen Experten

Rom – Sollte es in naher Zukunft zu einem Ausscheiden Italiens aus der europäischen Einheitswährung kommen, dann kennt man inzwischen das genaue Datum, wann der erste Schritt dazu eingeleitet wurde: am 28. Mai 2019. An diesem Tag hat die italienische Abgeordnetenkammer einen Antrag verabschiedet, der es der Regierung erlaubt, die zweistelligen Milliardenschulden des italienischen Staates gegenüber den einheimischen Unternehmen unter anderem auch durch die Ausgabe von sogenannten Mini-Bots in kleiner Stückelung zu begleichen. Bot ist die Abkürzung für Buono ordinario del tesoro: Staatsanleihen mit kurzer Laufzeit (maximal zwölf Monate), die normalerweise zur Erhöhung der kurzfristigen Liquidität des Staates dienen. Der Nennwert der bisherigen Bots lautet auf mindestens 1.000 Euro – und genau das ist der Haken der neuen Mini-Bots: Bei diesen läge der Nennwert bei 100 Euro oder noch tiefer. Experten warnen: Sind die neuen Mini-Bots erst einmal ausgegeben, könnten sie schnell als Zahlungsmittel verwendet werden – und so zu einer Art Parallelwährung werden.

Austritt in Trippelschritten

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Italy’s Politics Fail to Rattle Its Financial Markets

Posted by hkarner - 14. Mai 2018

Date: 13-05-2018
Source: The Wall Street Journal

A likely government coalition, once considered a threat to the Italian economy and the eurozone, hasn’t stopped its stocks and bonds

Italy may be led by a coalition of the hard-right League party, led by Matteo Salvini, left, and the antiestablishment 5 Star Movement, led by Luigi Di Maio, right.

In Italy, a political pairing that investors once considered a worst-case scenario is set to become the new government, yet Italian stocks continue to outperform all other major developed markets this year.

The anticipated government coalition between the hard-right League party and the antiestablishment 5 Star Movement, a combination long considered by analysts to pose a major risk to the country’s economy and the eurozone itself, hasn’t stopped Italian stocks and bonds from outperforming.

The country’s headline stock index, the FTSE MIB, is up 11% this year, well above the eurozone’s broader Euro Stoxx 50 index and the S&P 500, each up around 2%. Den Rest des Beitrags lesen »

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Stocks and Bonds Are Going Nowhere Fast, Stranding Investors

Posted by hkarner - 8. Mai 2018

Date: 07-05-2018
Source: The Wall Street Journal

Despite a strong economy and robust corporate earnings, investors aren’t piling in—but they aren’t bailing either

Traders working on the floor of the New York Stock Exchange on Friday after the U.S. Labor Department reported the unemployment rate fell to its lowest level since December 2000.

U.S. stocks and bonds appear deadlocked despite a positive response to April’s “Goldilocks” jobs report, reflecting the conflicting impulses of a strong economy against rising interest rates and creeping fears about inflation.

Lingering concerns over the durability of the global growth story and the likelihood of tightening monetary policy have left many investors in a rut, neither inspired to pour money into the market nor convinced they should bail out just yet.

Markets’ inability to get a meaningful boost from the glut of strong corporate earnings over the past few weeks has sapped confidence further. And other events that likely would have jolted the markets last year, such as the unemployment rate falling to its lowest level in nearly two decades and Apple Inc. announcing an additional $100 billion in share buybacks, have failed to spark a sustained rally. Den Rest des Beitrags lesen »

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Cashing In: Why Cash Should Be in Your Portfolio Again

Posted by hkarner - 6. April 2018

Date: 06-04-2018
Source: The Wall Street Journal

As volatility returns to the markets and interest rates rise, cash is turning out to be a safe asset

The Federal Reserve’s rate increases and the Trump administration’s fiscal profligacy have pushed up the yield on cash and cash-like instruments to the highest level in years.

Holding cash is investment heresy after a decade of the lowest interest rates in history. It is time to consider the sacrilegious and add cash back into portfolios.

The value of cash was demonstrated in the first quarter: Both stocks and bonds lost money—the first quarter that has happened since the aftermath of Lehman’s failure in 2008. Cash turned out to be the safe asset. Den Rest des Beitrags lesen »

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The Clock Is Ticking Faster at Tesla

Posted by hkarner - 29. März 2018

Date: 28-03-2018
Source: The Wall Street Journal

Downgrade of Tesla bonds puts Elon Musk in a tough position

A Tesla Model 3.

Tesla will soon need money again. The trouble is, raising it suddenly looks a lot more challenging.

Moody’s Investors Service downgraded Tesla’s debt on Monday afternoon, citing persistently negative cash flow and continued production issues with the Model 3 mass-market sedan. Moody’s is keeping a negative outlook on the credit due to “the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity shortfall.”

Tesla’s bonds due in 2025, issued just last summer, were quoted near 90 cents on the dollar after hours. Meanwhile, the stock is down 23% in about a month, making equity more expensive. There are plenty of reasons that Tesla’s magic touch with the capital markets is fading fast. Den Rest des Beitrags lesen »

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Why Aren’t US Bond Investors Panicking?

Posted by hkarner - 28. März 2018

Anatole Kaletsky is Chief Economist and Co-Chairman of Gavekal Dragonomics. A former columnist at the Times of London, the International New York Times and the Financial Times, he is the author of Capitalism 4.0, The Birth of a New Economy, which anticipated many of the post-crisis transformations of the global economy. His 1985 book, Costs of Default, became an influential primer for Latin American and Asian governments negotiating debt defaults and restructurings with banks and the IMF.

Economists may warn that the combination of Trump’s protectionism, big tax cuts, and uncontrolled government borrowing, coming at a time when the US economy is already near full employment, will ultimately fuel inflationary pressure. But financial markets simply do not believe this message.

LONDON – As US President Donald Trump ratchets up his trade war with China and the Federal Reserve Board increases US interest rates, the prospects for the world economy and financial markets, so bright just a few months ago, appear to be darkening. Stock markets around the world have fallen back toward their February lows, business confidence has weakened in Europe and much of Asia, and policymakers worldwide are making nervous noises. Are these events the beginning of the end of the global economic expansion, or is the recent market turbulence just a false alarm? Den Rest des Beitrags lesen »

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Can Markets Handle So Much Trouble at Once?

Posted by hkarner - 25. März 2018

Date: 24-03-2018
Source: The Wall Street Journal

Investors are suddenly facing a trio of negative forces: trade tariffs, tech swoons and central bank tightening

Trouble comes in threes. In isolation, the headwinds facing global markets—fears of a trade war, problems for the highflying tech sector, and central banks tightening policy—could be manageable. Taken together, they spell continued turbulence.

The turnaround in markets has been sharp after January’s bright start. U.S., European and Japanese stocks are all down for the year. Bonds have offered no haven: U.S. Treasurys, investment-grade corporate and high-yield bonds are all sporting negative returns. Emerging markets are faring better, but may suffer if risk aversion persists.

On trade, markets may have become too relaxed last year, when hawkish noises from the U.S. administration failed to turn into anything significant. Even as tensions ratcheted up, economists were quick to argue that tariffs on steel and aluminum would have little direct impact on the global economy. But President Donald Trump’s actions on China, and China’s swift response, clearly increase the risk of a trade war. The Bank of England warned this week that greater protectionism could hit global growth and push global inflation up, a toxic mix.

Meanwhile, the tech troubles centered on Facebook , down 11% this week, are a new shock that may undermine a popular trade that appeared unstoppable until recently. Analysts at Nomura suggest that a regulatory or customer backlash against businesses built around data might burst a bubble that so far hasn’t been seen as one, with investors too focused on past crisis flashpoints like banks and sovereign debt.

It shouldn’t be a shock that central banks are gently removing stimulus: it has been discussed endlessly for months. But ultraloose policy has underpinned markets by suppressing volatility, encouraging investors to pile into risky stocks and bonds.

That increases the chance of sharper market moves even as central banks proceed cautiously. One sign of rising concern is that corporate-bond spreads, which initially appeared robust in the wake of the stock-volatility shock in February, are now moving steadily wider. In both the U.S. and Europe, high-yield bond spreads are some 0.5 percentage point wider than their tightest point this year, while investment-grade spreads are about 0.25 point wider.

Set against all of this is still the sense of momentum in the global economy that supported markets in 2017, and the continued softness of the dollar. But investors fretted about how much those factors had pushed up asset prices last year even when shocks were fewer and further apart. Stocks and bonds are a little cheaper now, but not much, and the threats to the outlook are clearer. Caution is advised.

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