What investors can learn from the Virgin bond saga
- The minimum investment was lower than those attached to other comparable deals and the 8 per cent yield was vastly more desirable than the 1 per cent return available to investors in government bonds in the current environment, she says.
- Crestone Wealth Management vice-chairman Clark Morgan, whose firm was among the co-managers of the Virgin debt raising and had a "limited number" of clients invested in the bonds, stands by the advice provided.
- Wealth manager Hamish Foletta of Sarto Advisory, however, says it is precisely the listed nature of bonds issued by corporates like Virgin that can make them attractive in the first place.
- Though these newer investment products have been a "positive development" in democratising access to bonds, Foletta wants to see more big listed companies issue debt to regular investors, while acknowledging that Virgin has perhaps not been the best ambassador for the model.
Why fixed-income diversification is a myth
- Whereas a diversified global equities fund run by Magellan might include 25 to 30 global stocks, active bond (or credit) portfolios typically comprise hundreds, if not thousands, of individual securities.
- This also contributed to havoc in the passive, exchange-traded fund (ETF) world where index-tracking products that were meant to be diversified across hundreds of Aussie bonds suddenly endured extreme illiquidity and price declines that were much larger than the losses recorded by the benchmark the ETF was supposed to be hugging.
- They don’t need or expect daily liquidity and are very comfortable with the idea that a diversified portfolio of high-yield bonds are inevitably going to experience downgrades and defaults, which is the inevitable trade-off they accept for the loftier returns these strategies can generate during the good times.
Coronavirus Surge Strains Municipal Bond Market, but Investors Still Pile In
- The recent surge in Covid-19 cases has brought more bad news for a municipal bond market already reeling from the impact of coast-to-coast shutdowns and record unemployment.
- On Wednesday, the U.S. Virgin Islands Water and Power Authority narrowly avoided default.
- The utility got a badly needed reprieve when Chicago-based Nuveen LLC agreed to accept a $34 million payment due Wednesday on Aug. 31 instead.
Wirecard is set to miss the very first payment on $561 million worth of debt and join the notorious 'no coupon' club
- Wirecard bonds are slated to join a deadly 'no coupon club' and miss it's very first payment on bonds worth 500 million euros ($561 million).
- Madeleine King, co-head of investment grade research at Legal & General Investment Management told the FT, that if Wirecard joins the NCAA, it would represent the first bond denominated in euros to earn the inauspicious tag since the financial crisis and collapse of Lehman Brothers.
- Wirecard was able to get the backing of bond investors thanks to an investment-grade rating from Moody's.
- While the 500 million euro bond is set to join the NCAA club, some of Wirecard's bonds will escape that fate.
- Last year Japanese tech giant SoftBank invested 900 million euros ($1 billion) in Wirecard convertible bonds - a type of bond that can be turned into equity.
Treasury Bonds Can No Longer Protect You Against Stock Market Volatility
- The 2020 pandemic has rendered government bonds virtually obsolete to hedge against market volatility, according to BlackRock.
- Once viewed as a “ballast” against stock-market volatility, nominal government bonds are not as reliable as they used to be.
- BlackRock says that monetary policy will depress returns across developed-market government bonds over the next five years.
- As central banks anchor interest rates at zero or below, bond holdings could generate negative returns for the foreseeable future.
- Central-bank intervention following the 2008 financial crisis kick-started the longest bull market in history for stocks.
- That’s probably because of where we are in the business cycle, the record amount of debt on individual, corporate, and government balance sheets, and the starting point for the latest policy intervention.
- Investors have been flocking to U.S. Treasurys in response to the pandemic, pushing yields to all-time lows.
Garrett Rolfe's lawyers asking for bail for former officer who shot Rayshard Brooks
- A hearing will be held by video Tuesday afternoon, according to attorneys Noah H.
- The arrests of the two officers at the scene of Brooks' death was followed by days on which a large number of Atlanta officers called out sick from work.
- Rolfe's attorneys say in court documents that he should be granted a reasonable bond because he needs the opportunity to assist his counsel in preparing for this case.
- The filing also says that Rolfe was legally justified and acting in self-defense when he shot and killed Brooks, who wrestled with police and took the Taser of Officer Devin Brosnan during the scuffle.
- Video, which the defense filing calls the most valuable evidence in the case, shows Brooks running as Rolfe chases him.
RBA readies for rise in insolvencies
- He questioned the merit of negative interest rates and pointed to a lack of demand to borrow money, when asked if the central bank considering further subsidising bank lending by adjusting its $135 billion Term Funding Facility bank funding program.
- While the Reserve Bank's actions have been highly effective in stabilising bond markets and lowering borrowing costs, other central banks have taken more extreme measures- such as purchasing corporate bonds, expanding bond purchase programs and exploring negative interest rates.
- The Reserve Bank's deputy governor said liquidators are preparing for a delayed but inevitable rise in business failures in the coming months while uncertain businesses are reluctant to take advantage of historically low interest rates.
Wall Street banks net record fees for pandemic fundraisings
- Emergency financings by car maker Ford, cruise line operator Carnival and aerospace and defence group Boeing were among the fundraisings that provided multimillion-dollar paydays for Wall Street banks that found investors willing to stump up the money.
- Companies, countries and other organisations have raised more than $US7.8 trillion by borrowing in bond and loan markets and selling shares this year, according to financial data provider Refinitiv.
- Morgan Stanley chief executive James Gorman this month told his bank's financials conference that M&A was “basically dead” for the second half of the year.
- The biggest fee packages included $US119 million paid to the group of banks that helped T-Mobile borrow $US19 billion to fund its takeover of Sprint, according to Refinitiv.
- Emergency financings by carmaker Ford, cruise line operator Carnival and aerospace group Boeing were among the fundraisings that provided multimillion-dollar paydays.
How to avoid a September cliff edge
- Bond sales to the Reserve Bank would allow stimulus to continue without busting the budget or raising taxes.
- The OECD thinks Australia has ample fiscal space to support economic recovery; that, over time, future growth could be expected to wear down government debt relative to the size of the economy.
- An alternative approach would be for the RBA to fund the federal budget deficit by buying government bonds directly from Treasury, or through the private secondary bond market, and holding them indefinitely on its books.
- Monetising much of the increased public debt incurred by a post-September fiscal stimulus should not be inflationary in a depressed economy.
- Funding post-September stimulus measures through bond sales to the Reserve Bank would limit the government’s debt burden and obviate the need for tax hikes and austerity measures in the future.