BARC.L - Barclays PLC

LSE - LSE Delayed price. Currency in GBp
-2.18 (-1.85%)
At close: 4:35PM BST
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Previous close117.90
Bid115.46 x 0
Ask115.52 x 0
Day's range114.24 - 118.38
52-week range73.04 - 192.99
Avg. volume69,368,208
Market cap20.071B
Beta (5Y monthly)1.24
PE ratio (TTM)9.98
EPS (TTM)11.60
Earnings date29 Jul 2020
Forward dividend & yieldN/A (N/A)
Ex-dividend date27 Feb 2020
1y target est221.84
  • 2020 stock market recovery: I’d buy these 2 cheap FTSE 100 shares to make a million

    2020 stock market recovery: I’d buy these 2 cheap FTSE 100 shares to make a million

    These two FTSE 100 (INDEXFTSE:UKX) shares could deliver an improved performance as the stock market recovers over the long run.The post 2020 stock market recovery: I’d buy these 2 cheap FTSE 100 shares to make a million appeared first on The Motley Fool UK.

  • SoftBank-Backed Lemonade to Raise $319 Million in IPO

    SoftBank-Backed Lemonade to Raise $319 Million in IPO

    (Bloomberg) -- Lemonade Inc., the online home insurance provider backed by SoftBank Group Corp., is set to raise $319 million in its U.S. initial public offering.The company will sell 11 million shares at $29 apiece, Lemonade said in a filing, confirming an earlier Bloomberg News report. It was marketing 11 million shares at $26 to $28 each after boosting the range from $23 to $26, according to filings with the U.S. Securities and Exchange Commission.At $29, Lemonade would have a market value of $1.6 billion, based on the number of shares outstanding listed on its IPO filings.SoftBank led a $300 million funding round in Lemonade last year, valuing the company at $2.1 billion at the time, Bloomberg News previously reported. SoftBank will own a 21.8% stake in the company upon the IPO, the filing shows. Sequoia Capital Israel and General Catalyst are also among backers.Lemonade has yet to turn profitable since its inception in 2015, it said in its prospectus. It reported a $36.5 million net loss in the three months ended March compared to a net loss of $21.6 million during the same period last year. Its sales have more than doubled in that period.The company allows customers to buy insurance policies on a mobile app after answering several questions. It also pledges to donate the leftover funds, after expenses, to a charity in order to discourage fraudulent claims.While the company is headquartered in New York, it has roots in Israel and it has 123 full-time employees there, its filing showed.Goldman Sachs Group Inc., Morgan Stanley, Allen & Co. and Barclays Plc are leading the offering. Citadel Securities is the designated market maker for the listing.Lemonade will list on the New York Stock Exchange Thursday under the symbol LMND.(Updates with details from statement in second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • How Are Planet Fitness and IHOP Securitizations Doing Now?

    How Are Planet Fitness and IHOP Securitizations Doing Now?

    (Bloomberg Opinion) -- It looked like the perfect feat of Wall Street ingenuity. Then the coronavirus pandemic struck.For the past few years, asset-backed securities known as “whole business securitizations” had become a steadily growing presence in the structured-finance market. Chain restaurants like Dunkin’, Hooters, TGI Friday’s and Wendy’s were among the first to take up bankers on this process, which involves companies selling almost all revenue-generating assets into bankruptcy-remote, special-purpose entities in exchange for investment-grade credit ratings and much cheaper financing. More recently, other franchise-focused enterprises like Planet Fitness Inc. and Massage Envy LLC followed.There’s a lot to like about these securities for fixed-income investors. They usually offer higher yields than comparably rated corporate bonds, for one. They’re backed by cash flow from hundreds, if not thousands, of individual locations across the country that each have unique demand dynamics and would likely keep operating and sending money to investors even if the parent company filed for bankruptcy.You might be able to guess where the story goes from here. Yes, some securitizations are doing fine, like Domino’s Pizza Inc., whose stock price reached a record this month. And Driven Brands, which has more than 3,200 automotive services shops across 49 U.S. states and all Canadian provinces, successfully priced $175 million of debt on Friday in the first such deal since March. But a handful of the bonds are showing signs of cracking under pressure from Covid-19. Specifically, restaurants that are overwhelmingly dine-in or concentrated in malls, as well as the aforementioned Planet Fitness and Massage Envy. Consider Dine Brands Global Inc., the parent of the Applebee’s and IHOP brands. Obviously, it’s hardly a boom time for going out for breakfast. Its whole-business securitization from 2019, rated triple-B by S&P Global Ratings, traded at more than 100 cents on the dollar on March 11, then tumbled to about 77 cents in April, Trace data show. While trading in this kind of debt is relatively sparse, it seems to have rebounded to 87 cents, equivalent to a yield of about 8%. The average junk bond yields 6.77%, according to a Bloomberg Barclays index.S&P said in a report last week that it could lower the transaction’s ratings within the next three months, given the sharp drop in dine-in revenue. In a sign of how serious this is for Dine Brands, it’s waiving its right to a management fee at least through the beginning of September and has redirected the residual to pre-fund debt service, S&P said. Dine Brands also voluntarily doubled the interest reserve to $32.8 million from $16.4 million.At least in S&P’s view, the situation is even worse for TGI Friday’s, which had already cut total restaurants to 796 in March from 894 three years earlier. In mid-May, the rating agency downgraded the chain’s 2017 notes to B+, four steps below investment grade, and said there’s a 50-50 chance it would drop it even further. “Though the pandemic has placed significant stress on the restaurant industry broadly, we believe TGIF will face near-term revenue stress that is particularly severe,” the S&P analysts wrote. They found the securitization can withstand a 43% decline in collections before experiencing an interest shortfall in the next several months. That’s a high hurdle, to be sure, but hardly impossible.Focus Brands, the parent of popular mall chains like Auntie Anne’s, Cinnabon and Jamba, is also having a rough time. Its whole-business securitization from 2017 traded at about 93 cents on the dollar last week, implying a yield of 12% (its expected maturity is April 2021). Kroll Bond Rating Agency has said it might downgrade the transaction, along with others that combined have a $3.1 billion outstanding balance.Planet Fitness’s whole-business securitization, which helped Guggenheim Securities win GlobalCapital’s 2019 best securitization bank of the year award, sunk to as low as 64 cents on the dollar in April, down from 103 cents previously. One of its gyms in West Virginia may have exposed more than 200 people to Covid-19, according to reports Monday. The company said the gym was closed “for an additional deep cleaning by a third party” but would quickly open again. Whether customers return just as swiftly is an open question.If there’s one company to watch, though, it just might be Massage Envy. The private-equity-backed spa chain, which had more than 1,000 locations when it issued its whole-business securitization, was always something of an outlier, given a 60-minute wellness massage or healthy skin facial costs about $50 for members. That’s a different price point than Domino’s, Five Guys or Taco Bell. The price of its securitization fell to 73 cents on the dollar in May. Now at 82 cents, that’s still equivalent to a yield of more than 12%, a level in the corporate-bond market that would indicate distress.It’s still quite likely that investors end up unimpaired, even in these struggling bonds. But this is certainly not what they thought they were signing up for, with plenty of competing forces now muddling the outlook. Anecdotally, I’ve made buffalo wings twice during lockdown that I’d consider better than TGI Friday’s and generally feel more adept in the kitchen than ever. I suspect others feel similarly. All else equal, how many people will want to venture out to support a dine-in chain over a small business, given all the painful stories about their struggles to make ends meet? Who exactly is eager to stroll around a shopping mall, let alone get their hands messy with a Cinnabon or Auntie Anne’s pretzel?I try not to get too committed to any one post-coronavirus future, but at least within the whole-business securitization market, a clear dichotomy is starting to emerge that roughly aligns with common-sense expectations. If a chain delivers food to customers in the comfort of their own home or car, it’ll be fine. If it’s a ubiquitous dine-in establishment, it’s a more dicey proposition. If it’s a gym that offered free at-home classes during lockdowns, people might very well just keep doing that, or make a one-time splurge on their own equipment. And it could be a while before customers feel truly relaxed when getting a massage or facial.That’s what this niche market is saying, at least. If investors think that assessment is out of whack, some huge yields beckon.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


    Beyond Meat Slips on Barclays Downgrade

    By Christiana Sciaudone

  • Another stock market crash could be imminent! Here’s what I’d do now

    Another stock market crash could be imminent! Here’s what I’d do now

    A stock market crash could be imminent due to recent over-optimism and the chance of a second Covid wave. One Fool looks at what to do in preparation. The post Another stock market crash could be imminent! Here's what I'd do now appeared first on The Motley Fool UK.

  • Fintech Zopa set to launch first banking products
    Yahoo Finance UK

    Fintech Zopa set to launch first banking products

    Zopa has been granted a full banking licence with no restrictions, allowing it to launch its fixed savings account and credit card to the public later this year.

  • Robinhood Crowd Misses Out on Convertible Bonds

    Robinhood Crowd Misses Out on Convertible Bonds

    (Bloomberg Opinion) -- It’s growing more likely by the day that we’ve reached peak “bored retail trader” in the financial markets.Bloomberg News, The Wall Street Journal and seemingly every financial news publication has now profiled Dave Portnoy, founder of the website Barstool Sports, who has turned to day-trading stocks with sports on hold because of the coronavirus pandemic. Robinhood Financial’s trading app is all the rage, being credited with the shocking rally in shares of bankrupt Hertz Global Holdings Inc. that almost prompted an unthinkable offering of potentially worthless stock. My Bloomberg Opinion colleague Matt Levine has called this entire phenomenon the “boredom markets hypothesis.” If this trend is close to running its course, more traditional investors might want to consider what happens when the music stops and Portnoy’s No. 1 rule — “stocks only go up” — doesn’t work so flawlessly. The S&P 500 Index’s sharp rally from its March lows is already starting to fizzle, with the index down more than 3% during the past two weeks. While hardly backbreaking, it’s the largest loss over such a sustained period since the worst of the selloff three months ago. Even sideways trading for the summer would violate the day trader’s mantra.Fortunately for sophisticated investors who might side with Warren Buffett and Leon Cooperman over the Robinhood crowd, there’s an intriguing asset class for this crossroads: convertible bonds.The securities, which can be swapped for shares at specified prices, have already been having something of a moment. The Bloomberg Barclays U.S. Convertibles Composite Total Return index jumped to a record on June 8 and remains close to that lofty level. Convertible bonds have gained 7.8% so far in 2020, better than the 5% return on investment-grade corporate bonds and the roughly 3% loss for the S&P 500. I’ve written before about how it seems as if there’s something inherently “cheap” about convertibles that boosts returns above and beyond a mix of stocks and bonds. Part of it might be the types of companies that offer such securities. Within the Bloomberg Barclays index, some of the biggest names include Tesla Inc., Carnival Corp., Southwest Airlines Co., Microchip Technology Inc. and Workday Inc. In other words, a combination of technology companies that have powered the U.S. stock market rally and brand-name businesses particularly harmed by the coronavirus but part of the “recovery trade” strategy. American Airlines Group Inc. is in the market selling convertible notes, too.Some of these individual companies are favorites of the new day-trading crowd. But for those who want to bet on convertible bonds, and specifically to keep trading relatively small sums with zero commission, the $4 trillion exchange-traded fund market is probably their best bet. Yet even the asset class’s sharp rally hasn’t been enough to lure individuals from the thrill of wagering on the trendy stock pick of the day. Consider the $717 million iShares Convertible Bond exchange-traded fund (ticker ICVT), which has soared since March and is up more than 6% this month alone. A few weeks ago, it looked as if it might have been discovered — on June 3, its assets increased by 21% as investors poured a net $108.3 million into the fund, the most since its inception roughly five years ago, according to data compiled by Bloomberg. It gained an additional $69 million on June 9, good for the second-biggest inflow ever. On the flip side, State Street’s $4.47 billion SPDR Bloomberg Barclays Convertible Securities ETF (ticker CWB) suffered an outflow of $107.6 million on June 10, the largest daily withdrawal on record, followed by a $75 million exodus on June 11. That’s a stark contrast to the tens of billions of dollars flowing into credit ETFs.That seeming lack of interest is just fine for investors like Eli Pars, co-chief investment officer and head of alternative strategies at Calamos Advisors. The Naperville, Illinois-based firm is the largest public holder of convertible bonds issued in April by Carnival and Southwest Airlines, according to data compiled by Bloomberg.“It’s a great way to play the stock market in a less volatile way,” he said in a phone interview. While this is the common elevator pitch for investing in convertibles, the securities backed up that claim during March’s turbulence by tumbling less than benchmark equity indexes. That’s because investors can always fall back on interest payments if equity prices fall while capitalizing on a rally because the value of the option to convert to shares increases as well.Pars says convertibles are compelling for those with significant equity holdings who want to dial back their risk a bit after the sharp rebound in the past three months, or for those who sat out the entire rally and want some protection from a reversal. It’s a safer bet than simply taking short positions on the S&P 500; Bloomberg News’s Cameron Crise calculated that speculators have ratcheted up their bets against the index to the most extreme level since 2011.In some ways, the new band of Robinhood traders plays right into the hands of investors like Pars. He manages the $9 billion Calamos Market Neutral Income Fund, which partly employs a strategy known as convertible arbitrage. The trade involves buying and holding the convertible bond while hedging with a short position in the common stock, in theory generating a nearly riskless profit from price discrepancies between the two assets. That’s more likely to happen when there’s added volatility — and especially when the fluctuations seemingly come out of nowhere. “It’s one thing when you have volatility driven by real fundamentals,” Pars says. “When you have more noise volatility, that’s perfect for an arb.”With so much uncertainty surrounding how quickly states can emerge from lockdowns, and just how quickly Americans will travel the way they used to, even modest downside protection, like the 1.25% interest rate on Southwest Airlines’s convertible securities, can be a comfort for investors. That could wind up being a better yield than similar maturity Treasuries over the next five years, given that it’s anyone’s guess whether the Federal Reserve will have raised short-term interest rates from near-zero by then.These are the prudent — albeit less entertaining — calculations that professional investors are paid to think about. There’s still a large divide between the newbie traders who fly in and out of stock and ETF positions on a whim thanks to no-fee trading, and Wall Street denizens who scrutinize market segments mostly out of reach of Robinhood. The former are best thought of like shares of Hertz, surging 682% in the span of days but now sputtering toward zero again.Convertible bonds, by contrast, have delivered average annual returns of 9% or higher over three-, five-, 10- and 15-year horizons. It stands to reason they’ll keep doing so long after the legions of bored traders find a new hobby.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • EM Review: Stimulus Actions Helped Outweigh Second Wave Concerns

    EM Review: Stimulus Actions Helped Outweigh Second Wave Concerns

    (Bloomberg) -- Emerging-market stocks recorded a second weekly gain in June last week amid optimism over central-bank measures to support economies and progress in the U.S. and China trade negotiations. Most developing-nation currencies declined as the dollar gained. Policy makers in Brazil, Indonesia and Russia cut interest rates, while the Federal Reserve said it would start buying individual corporate bonds under its emergency lending program.The following is a roundup of emerging-market news and highlights for the week through June 21:Click here to read our emerging-market weekly preview, and here to listen to out weekly podcast:Highlights:Covid-19: Brazil’s Covid-19 infections passed the 1 million mark; Mexico reported record numbers of daily casesAt least 158 people have been infected in a new outbreak in Beijing after a lull of two months without cases in the capital. Officials are trying to strike a balance between containment and keeping the economy running in the cityIndonesia surpassed Singapore as the country with the highest number of infections in southeast AsiaA surge in cases in Iran may prompt renewed lockdownsU.S. states including Texas, Florida and Arizona reported a jump in casesU.S. Macro: The Federal Reserve said it would begin buying individual corporate bonds under its Secondary Market Corporate Credit Facility, an emergency-lending program so far focused only on exchange-traded fundsFed Chair Jerome Powell urged Congress not to pull back too quickly on federal relief for households and small businessesThe Trump administration is preparing a near $1 trillion infrastructure proposal as part of its push to revive the economy, according to people familiar with the matterU.S.-China Relations: U.S. Secretary of State Michael Pompeo said China’s top foreign policy official committed in a meeting to honor all of his nation’s pledges under the phase-one trade dealChina confirmed that a proposed national security law would allow Beijing to override Hong Kong’s independent legal system, shedding new light on a move that has stoked tensions with the U.S. and threatens the city’s status as a top financial centerPresident Trump signed a measure punishing Chinese officials for imprisoning more than a million Muslims on the same day a new book alleged he encouraged Beijing to build internment camps to house themArgentina extended a deadline for bondholders to accept a debt-restructuring proposal for a fifth time after talks hit a roadblock; the new date is July 24Both creditors and the government submitted new restructuring proposals earlierArgentina’s Ad Hoc and Exchange Bondholder groups said in a joint statement Friday after the extension was announced that they’re “united in disappointment” about the decision to “terminate dialog” with creditors at a critical junctureBrazil’s central bank left the door open to more monetary easing after cutting rates by 75 basis points to a record low 2.25% to support the economyMexico’s airliner Aeromexico is considering filing for Chapter 11 bankruptcy, according to sources; firm said it hasn’t made a decision yetThe Asian Development Bank cut its inflation forecast for developing Asia to 2.9% from 3.2%North Korea destroyed an inter-Korean liaison office on its side of the border, and pledged to move troops into a disarmed border areaChinese and Indian soldiers attacked each other with stones, iron rods and bamboo poles along their disputed border; 20 Indian soldiers and an unknown number of Chinese were killedIndonesia’s central bank cut rates for the first time in three months and lowered its growth outlookPoland may be opening a new line of defense for the pandemic-hit economy after cutting interest rates to near zeroRussia lowered interest rates by the most in five years and signaled another reduction is likelyA rebound in appetite for emerging-market exchange-traded funds proved to be short lived as outflows resumedAsia:China will sell 1 trillion yuan ($141 billion) of special sovereign bonds by the end of July, with the proceeds used to combat the impact of the coronavirus, according to people familiarChina’s cabinet signaled the central bank will act to make more liquidity available to banks so they can lend moreChina’s economy continued to inch out of the coronavirus slump in May, although growth in industrial output was slower than forecast and consumer demand remained sluggishChina will push the financial industry to sacrifice 1.5 trillion yuan in profit this year; central bank wants the total flow of credit to rise by almost a fifth in 2020G-7 foreign ministers urged China to reconsider its plan to impose a new national-security law on Hong KongSouth Korea announced new steps to curb overheating in the property market, underscoring its concerns about the side effects of liquidity pumped into marketsSouth Korea warned the North against further provocations, saying the latter must bear the consequences of its actionsIndia’s trade fared slightly better in May than a month ago as restrictions easedThe country’s credit score moved a step closer to junk after Fitch Ratings cut the outlook to negative, citing weak growth prospects and rising public debtIndonesia lowered its outlook for economic growth to a range of 0% to 1%, while warning of the possibility of a full-year contractionThe nation registered a larger trade surplus than forecast in May, as a 42% decline in imports outweighed a larger-than-expected drop in exportsThe Philippine central bank governor said the peso’s recent depreciation wasn’t a concern and excess liquidity in the financial system is unlikely to stoke inflationThe Philippines will keep Manila under loose restrictions, allowing most businesses to continue operating even as coronavirus cases riseThe country is weighing new taxes to fund economic stimulusBank of the Philippine Islands says it plans to issue what will be the country’s first Covid Action Response BondsNation’s current account swung to a $92m surplus in 1QThai Cabinet has approved a 22.4 billion baht ($723 million) package to boost domestic tourismThe biggest party in Thailand’s pro-military ruling coalition is due to pick a new leader soon, a step that’s expected to strengthen the stability of the governmentTaiwan has passed the worst economic damage from the coronavirus, according to the central bank, which kept rates unchanged and forecast an upturn in the second halfTaiwan launched an investigation into three men accused of spying on behalf of BeijingTaiwan’s central bank stepped in to FX market in June due to “huge” foreign inflows in a short space of time after outflows seen in January to May, governor Yang Chin-long saidEMEA:Turkey airlifted commandos into northern Iraq, stepping up a military drive against Kurdish militants after its parliament kicked out two pro-Kurdish lawmakers on separatism chargesBelarus raised $1.25 billion in international debt markets, seizing on a revival in global credit availability to secure long-sought financingRussia is comfortable with an oil price of about $50 a barrel, a level that would cover the government’s financial needs and wouldn’t create problems for consumersVladimir Putin said he’ll consider running for a fifth presidential term in 2024, arguing that the hunt for any successor risks paralyzing Russia’s government as the next election nearsGermany’s top prosecutor filed charges against a Russian citizen for a murder in a Berlin park last summer, saying it was a contract killing ordered by officials from MoscowPoland’s central bank warned of the risks to an economic recovery from an overvalued currency after keeping rates unchanged at 0.1%. The new signal is tantamount to a verbal intervention that it would like to see a weaker zloty, analysts saidSaudi Aramco will consider selling bonds or taking on loans to help meet its commitment to paying dividends, Chief Executive Officer Amin Nasser saidThe world’s biggest oil exporter, has begun cutting hundreds of jobs as it looks to reduce costs after a slump in energy prices, according to people familiarSaudi Arabia resumed all commercial activities and lift restrictions on movement even as coronavirus cases show no signs of easing. The curfew was lifted across the nation from 6am on Sunday but international travel and the Muslim pilgrimage known as Umrah will continue to be bannedAramco has negotiated more time to pay for an almost $70 billion acquisition of Saudi Basic Industries Corp. as this year’s slump in oil prices stretches its financesMorocco’s central bank delivered the biggest rate cut in history and exempted lenders from holding cash in reserves, looking to jolt an economy emerging from a three-month lockdownEgypt’s bond market has been humming for months, helped by a stable currency and elevated interest rates. It may now take a more flexible pound to help keep investors coming backIsrael’s consumer prices plunged more than expected despite the central bank’s spate of foreign-currency purchases designed to weaken the shekel and boost inflationThe U.S. imposed sanctions on Syria’s President Bashar Al-Assad and his wife as the Trump administration increases pressure on the regime in an effort to end the nine-year civil warSouth Africa told asset managers and banks it needs 1.5 trillion rand ($86 billion) of infrastructure investment over the next decade, the country’s biggest specialist fixed-income fund saidThe nation’s debt levels will exceed 100% of gross domestic product in 2025 and rise to almost 114% before the end of the decade, according to a document presented by Finance Minister Tito Mboweni and seen by BloombergIt will ease lockdown rules for a third time since imposing them in March and allow a range of businesses including eat-in restaurants, casinos and beauty salons to reopen despite an increase in coronavirus infectionsNamibia’s central bank, whose currency is pegged to South Africa’s, diverged from its neighbor’s moves on monetary policy for the first time in two years as the country seeks to balance supporting its economy with safeguarding investment inflowsBanco de Mocambique cut its benchmark rate for a second meeting as it tries to boost growth, and counters risks from the coronavirus pandemic and an Islamist insurgencyZimbabwe’s central bank abandoned a currency peg it introduced in March and said it would allow the rate to be set by an auction systemNigerian companies are poised to raise a record amount of local short-term debt as businesses take advantage of a drop in borrowing costsChina said it would waive some African nations’ debt and is willing to provide further support including loan-maturity extensions to free up funds needed to deal with the coronavirusDeveloped nations are considering financial support for a plan to relieve African countries of debt payments without triggering default, according to the United Nations committee steering the initiativeGhana’s economic growth slowed to the least in four years in the first quarterLatin America:The International Monetary Fund has extended its safety net under some of Latin America’s biggest economies as the pandemic hits the region particularly hardBrazil’s police arrested a former aide to one of President Jair Bolsonaro’s sons for participation in an alleged corruption scheme, fueling political tensionsSupreme Court voted to move forward with a sprawling fake news investigation targeting some of Bolsonaro’s most influential supportersTreasury Secretary Mansueto Almeida decided to leave the post in July and Education Minister Abraham Weintraub stepped down after repeatedly clashing with Supreme Court justicesEconomic activity index tumbled 15.1% in April from a year earlierArgentina’s government announced a swap for peso bondholders for as much as $1.5 billion in new dollar-denominated local law bondsThe province of Mendoza plans to miss a debt payment, which would make it the third Argentine issuer to default this year, according to sourcesBuenos Aires province is extending the deadline for creditors to accept a bond swap until July 31, according to a statement on its websiteFidelity Investments sold a large chunk of its Province of Buenos Aires bonds in recent months, according to sourcesCoronavirus cases may peak in Argentina sometime between the end of June and beginning of July, the health minister saidEcuador repaid another loan to Goldman Sachs Group Inc. in a move that paves the way for a debt restructuring with its foreign creditorsChile’s central bank tripled its forecast for an economic contraction this year after keeping the interest rate unchanged at a record low and saying it would stay there for the next two yearsOfficials announced an asset-purchase program for as much as $8 billion and increased a credit line to commercial banksChile has among the world’s highest rates of per-capita infections, and its once-praised health minister has been forced to resignMexico’s president will tone down his rhetoric against business leaders, a close senator saidFinance minister said the country’s recovery would be much slower than its rate of contractionColombia is ditching its fiscal deficit targets until 2022 and the debt burden is expected to rise to 66% of GDP this year from 50% in 2019Colombia can’t wait another three years to fix its public finances, Fitch Ratings saidPeru’s economic activity slumped more than 40% in April from a year earlierHonduras sold $600 million in 10-year bonds, becoming the lowest-rated nation in Latin America to sell dollar debt amid the pandemicPresident Juan Orlando Hernandez was hospitalized with Covid-19Belize is seeking relief from foreign debtholders for the third time since 2012For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • The Future of Work in America Is in the Office

    The Future of Work in America Is in the Office

    (Bloomberg Opinion) -- Ever since the coronavirus sent millions of people home to work, people have been predicting that remote work will endure after the pandemic is over.Color me skeptical.I can’t imagine everyone not wanting to race back into the office the minute it is safe to do so. But my wife and I both have full-time jobs, and we have been home with our two young kids. The corporate world isn’t debating a post-pandemic future of continuing the lockdown, but instead of working remotely from home while kids are at school and cafes are open. So set aside the challenges of the last few months with school closures and social distancing, and consider whether traditional offices may be a thing of the past. Some companies clearly think it is. My fellow Bloomberg columnist Tyler Cowen has bemoaned the tech industry’s apparent conversion. Slack, the messaging technology company, announced last week that most of its employees would have the option of permanently switching to remote work, and that it would increasingly hire people into remote-work positions. Facebook expects that half its workforce could be remote in the next five to 10 years. Last month, Twitter announced that its employees could continue working from home permanently. Other employers are changing policies as well. Nationwide Insurance is planning to close offices around the country by Nov. 1, moving those employees to permanent telework status. Barclays CEO Jes Staley said in April that “the notion of putting 7,000 people in a building may be a thing of the past.” There is some preliminary evidence that remote work is working. Or, at least, that is isn’t failing. Upwork, an online staffing company, recently published results from a survey of hiring managers. The survey finds that over half of the U.S. workforce is working from home. Fifty-six percent of hiring managers think the shift to remote work has gone better than they had expected. Around one-third of managers think remote work has increased productivity, while 23% think productivity has dropped. Over six in 10 hiring managers report that as a result of the pandemic, their organization’s workforce will be more remote than it was before. But it’s critical that managers not overlearn lessons from the pandemic. This spring, managers were nervous that productivity would tank during the shutdown because telework would be unsuccessful. Employees would slack off during the day without colleagues and supervisors nearby, and given all the distraction of home. Surely this anxiety was communicated inside businesses, and workers got the picture. Many likely ramped up their effort during the shutdown to prove to their bosses that they were still valuable as teleworkers. With the rest of the world shut down, too, people had to put off a lot of the functions of normal life, not just going out for social reasons, but also for important things like doctor’s appointments. Add to this workers’ worries about recession-driven layoffs, and it’s no surprise that many managers see productivity increases. But a company that permanently switches to telework once the pandemic is behind us would be doing so in a very different environment. If telework is the norm and layoffs aren’t a pressing concern, workers may not put in special effort. And with the world opened up, the boss can’t be sure employees are tethered to their homes, the way they have been. Like many, I have been surprised by how well working from home has gone. My usual in-person interactions with colleagues have translated quickly and efficiently to Zoom and phone calls. But the sudden nature of the pandemic shutdown meant that I had well-established relationships with all my now-remote colleagues. These relationships were built on months and years of in-person interactions. It’s much easier to work with someone productively using Zoom and email if you have a well-established relationship with them first. Now that the U.S. is in its second quarter of telework, new employees will be hired in this environment. How quickly they integrate into corporate communities and ramp up their contributions will be a much better indicator of whether a company should go remote permanently than the experience with remote work from this spring.Productivity is something of a black box, but anyone with coworkers knows the important role that emotional intelligence plays in getting work done. Being able to read someone’s body language, tone of voice, or slight changes in facial expression is often critical to work in a team setting. It is hard to learn how to interpret these idiosyncratic forms of expression outside of the social setting an office provides. Likewise, trust, group cohesion and collegiality develop in large part through the informal interactions that occur in workplaces throughout the day. In the Upwork survey, nearly one-third of hiring managers reported that reduced team cohesion has been an issue with remote work. Managers should think twice before assuming productivity won’t suffer without this subtle elixir.Having a good working relationship with people outside your immediate group is also important. In an office, you bump into many people once or twice a week while getting coffee or walking to the building from the parking lot, bus or train. In an office setting, you are acquainted with them. Under remote work, they are strangers. Some of the relatively few studies on remote work do show that working from home increases productivity, but those that I am aware of examine companies in which work is solitary. For example, a Chinese travel agency randomly assigned some call-center employees to work from home, leading to a 13% performance increase in that group. The applicability of this result to many businesses is limited. Similarly, the writing part of my job is a relatively solo task, and my editors at Bloomberg work in New York while I work in Washington. I have great relationships with my editors, but I see them in person several times per year, which is invaluable to making my remote arrangement work. Pandemic teleworking has led some to speculate that cities themselves may be depopulated, with people flooding to small towns when given the option to work remotely for big companies. But “work from anywhere” models suffer even more from the problems of remote work, because workers would have even fewer opportunities to interact in person with their colleagues. The economic benefits of close proximity are well known. Under “work from anywhere,” professional networks would fray, or wouldn’t even form. Creativity would suffer. Career opportunities, particularly for young people, would diminish. Lifetime productivity would fall. And the perceived benefits of working from anywhere for those who would rather not live in cities would diminish greatly over time if that business model was heavily utilized. The cost of living in smaller cities and towns would rise, and in major cities it would fall. The coronavirus pandemic has changed daily life more quickly than any event in modern memory. It will leave lasting effects. But once it is behind us, life will normalize to a greater degree than many seem to think. A lot of employees will work from home a few more days per month than they used to. Flying across the country for a one-hour meeting may be a thing of the past. But businesses operated as they did before the pandemic for good reasons, and once the virus is vanquished, those considerations will remain as compelling as ever. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Coronavirus: Emergency credit card, loan, and overdraft relief to be extended
    Yahoo Finance UK

    Coronavirus: Emergency credit card, loan, and overdraft relief to be extended

    The Financial Conduct Authority wants banks and credit card providers to offer payment holidays and interest free overdrafts for another three months.

  • Brokers bullish on Barclays shares

    Brokers bullish on Barclays shares

    The Barclays (LON:BARC) share price has risen by 13.3% over the past month and it’s currently trading at 118.82. For investors considering whether to buy, hold...

  • Coronavirus: Banks brace for surge in COVID-19 complaints
    Yahoo Finance UK

    Coronavirus: Banks brace for surge in COVID-19 complaints

    The chair of the new Business Banking Resolution Service says he is expecting a wave of complaints to arise from the COVID-19 crisis.

  • Fed Seems to Skirt the Law to Buy Corporate Bonds

    Fed Seems to Skirt the Law to Buy Corporate Bonds

    (Bloomberg Opinion) -- From the moment the Federal Reserve announced how it would buy bonds for its $250 billion Secondary Market Corporate Credit Facility, something seemed amiss. After all, the central bank already had criteria in place for buying individual corporate bonds, separate and distinct from exchange-traded funds. And yet, the Fed this week unveiled an entirely new class of eligible assets, called “Eligible Broad Market Index Bonds.” Why? Within an hour, I speculated that this was little more than a workaround for issuers being forced to certify that they’re in compliance with the Coronavirus Aid, Relief, and Economic Security Act.It turns out that’s more or less the extent of it. In a report provocatively titled “The $250 Billion Loophole,” Daniel Krieter and Daniel Belton at BMO Capital Markets meticulously broke down the latest information about the Fed’s corporate-credit facility. They also concluded that the certification process was rendering the central bank’s program powerless:The requirement that businesses have significant U.S. operations and a majority of its employees in the U.S. proved problematic for the Fed since the only way the central bank could realistically adhere to this was by having individual corporations certify their compliance with these prerequisites. Having a large percentage of hundreds of American corporations certify compliance was very difficult from an operational standpoint to begin with, and became even more so when certification potentially became stigmatized after credit spreads rallied so significantly. Without certification, the Fed was potentially left with a huge liquidity facility that wasn't allowed to buy anything but ETFs.Clearly, that didn’t sit well with Fed Chair Jerome Powell, who told the Senate Banking Committee earlier this week in response to questions about corporate-bond buying that “we feel we need to follow through and do what we say we’re going to do.” In other words, even though investment-grade bond yields are at record lows and every creditworthy firm that wants to borrow money can do so, the central bank still felt it needed to prove to investors that it’s capable of purchasing individual bonds.So, through an extremely generous reading of the CARES Act, the Fed figured out a way to simply become an investor in everything, as the BMO strategists explain: Section 4003(c)(3)(c) requires purchases of only companies with “significant operations in and a majority of its employees based in the Untied States” unless the purchases are “securities based on an index or that are based on a diversified pool of securities.” This clause was likely included to allow the Fed to buy ETFs. Instead, the Fed created its own index of corporate bonds, the “Broad Market Index,” and will now purchase individual corporate bonds based on this index under this clause. In one swift stroke, the Fed essentially made the entire universe of non-financial corporate debt under five years immediately eligible for purchase.This is a brazen move. Just take a moment to re-read the provision in its entirety(3) and keep in mind that each individual corporate bond is, by definition, a “security.”(C) UNITED STATES BUSINESSES. — A program or facility in which the Secretary makes a loan, loan guarantee, or other investment under subsection (b)(4) shall only purchase obligations or other interests (other than securities that are based on an index or that are based on a diversified pool of securities) from, or make loans or other advances to, businesses that are created or organized in the United States or under the laws of the United States and that have significant operations in and a majority of its employees based in the United States.I just don’t see how a single bond can be considered “based on an index,” nor “based on a diversified pool of securities.” It’s nothing more than a company’s liability (or “obligations,” per the above wording). ETFs, on the other hand, of course fit that billing: Each fund share is a single security that tracks a specific index or derives its value from many other securities. For instance, LQD tracks the iBoxx USD Liquid Investment Grade Index, while JNK tracks a more liquid component of the Bloomberg Barclays High Yield Total Return Index. Both are based on a wide swath of corporate bonds.Simply put, the Fed has inverted the CARES Act language. By any typical reading of the legislation, the central bank is granted the authority to buy indexed securities — not to invent its own index and buy individual corporate bonds needed to populate it. If the claim is that each individual bond is “based on an index” just because they’re a part of the custom “Broad Market Index,” then why bother with the exercise in the first place? After all, the Bloomberg Barclays U.S. Corporate Bond 1-5 Year Index already exists, has a $2.12 trillion market value and mostly covers the universe of eligible debt. By the Fed’s logic, each of the 2,242 member securities are therefore “based on an index.”While it may not ultimately be all that much different from buying a basket of ETFs, twisting the rules on the fly casts aside any notion that the central bank was content with serving as a lender of last resort for U.S. companies that couldn’t gain market access. “Yesterday showed that the Fed’s intent is not just to be a backstop, but to be an active participant in driving spreads back to pre-Covid levels,” Steve Kellner, head of corporate bonds at PGIM Fixed Income, told Bloomberg News’s Molly Smith on Tuesday. “This was a game changer.” By day’s end, average investment-grade bond yields tumbled to a new record low, 2.18%.While Wall Street cheers the move, the Fed’s “loophole” is potentially more sinister for Main Street. Congress granted the central bank authority to buy bonds from companies “that have significant operations in and a majority of its employees based in the United States.” That’s no longer a requirement for “Eligible Broad Market Index Bonds.” Powell has said throughout the coronavirus crisis that his overarching goal is to save American jobs, but this move makes it look as if narrowing credit spreads for large companies is his top priority. It’s hard to interpret this move as anything other than the central bank deciding it’s no longer worth the hassle of making executives certify that they employ a majority of their workforce in America before getting a boost, even though that’s a critical component of the law.“We’re implementing the law that you passed,” Powell said on Wednesday, in response to questions from Representative Jim Himes, a Connecticut Democrat, about whether the Fed’s credit facilities have terms to prioritize paying workers rather than dividends or debt service. “We don’t think it’s up to us to rewrite the law to achieve goals we might have.”It’s not clear who would be offended enough (or have the means) to challenge the Fed. Budget watchdogs have been rendered toothless. Jeffrey Gundlach, DoubleLine Capital’s chief investment officer, said in April that the Fed is “acting in blatant non-compliance with the Federal Reserve Act of 1913” but “will make some wonky semantic argument” to justify its actions. That sounds awfully similar to how it’ll get away with skirting CARES Act restrictions.More broadly, the federal government is distributing $3 trillion of economic rescue funds with little of the intended oversight. Bloomberg News’s Laura Davison reported Wednesday that even though three new oversight bodies are barely functional, about $2 trillion has already been distributed. There’s a balance between getting funds out fast and preventing abuse. Someday, we may know how it all shook out.Powell has repeatedly praised the speed and size of the government’s relief efforts, which may explain why he was willing to search for shortcuts to start the Fed’s corporate bond purchases. The central bank may yet be a minor player in the market — Powell claimed on Tuesday that “we’re not actually increasing the dollar volume of things we’re buying, we’re just shifting away from ETFs.” Consider me skeptical. At the very least, the Fed has carved out a path to maximizing the facility’s $250 billion of buying power. The Fed would have likely tapped out at $50 billion with ETFs alone.In the end, it almost certainly won’t matter that the Fed warped its power. For traders, that’s arguably the most important lesson in all of this: When the central bank puts its mind to something, don’t expect anything to stand in its way. Perhaps not even the law.(1) The passage in question is on page 193.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • A New York Bet on German Banks Turns Very Sour

    A New York Bet on German Banks Turns Very Sour

    (Bloomberg Opinion) -- Cerberus Capital Management LP has given up on the art of persuasion. After losing $900 million on stakes in Deutsche Bank AG and its smaller rival Commerzbank AG — about half of its original 2017 investments — the New York private equity firm has come out fighting. That Cerberus is turning from backer to shareholder activist says more about its miscalculations on German banking than its aspirations.Cerberus, run by the low-profile billionaire Stephen Feinberg, has vowed to seek “alternative paths” after Commerzbank rejected its request last week to give it two seats on the company’s supervisory board. In a punchy response, Cerberus said it remained committed to “achieving substantial change to the leadership,” and that management had failed to meet targets that weren’t ambitious enough to begin with.Commerzbank held its annual shareholder meeting just last month, so pushing for a seat at the table would mean Cerberus getting a German court to enforce an extraordinary general meeting, while winning over other investors to nominate the new candidates.The German bank is indeed in an “exceptionally difficult and vulnerable position,” as Cerberus points out. The pandemic struck just as it was starting to work through its latest restructuring. The shares have rebounded from a May low but they still value the lender at just 20% of its tangible book, hardly a sign of strength. In the European benchmark bank index, only an Italian and a Spanish bank — whose governments have a fraction of the firepower of Germany to support the economy through the pandemic — trade at similar lows.The frustration is understandable. Commerzbank’s chief executive officer, Martin Zielke, hasn’t exactly aimed for the stars and his execution has been slow. He has targeted a paltry return on tangible equity of 4% from cutting branches and some jobs. Deutsche Bank, in the middle of its biggest overhaul in decades, aims for 8% (although it’s questionable whether that’s achievable).Cerberus isn’t alone in wanting deeper and faster cuts. At least two more large Commerzbank investors agree, Bloomberg News has reported. And the German government, which still owns 16% of the lender after its crisis-era bailout, replaced its two supervisory board members in May because of similar concerns.However, Commerzbank’s management isn’t entirely to blame for Cerberus’s losses — even if the investment firm feels its advice fell on deaf ears in the 70 meetings it says it held with the company. The U.S. fund’s endorsement of a Deutsche-Commerzbank merger last year overlooked the difficulty of bringing together two large German employers, including significant job cuts that labor unions resisted. The aborted merger was a distraction at a time when both lenders needed to get their own houses in order.Nor should it have been a surprise that Commerzbank didn’t want to employ the consulting services of Cerberus’s advisory arm. While Deutsche Bank hired Cerberus in that capacity, the role was controversial because it gave a division of the private equity firm access to sensitive information (albeit across a Chinese wall).In fairness, the banking world did look rather different when Cerberus made its merger gambit. Interest rates were expected to rise, not head deeper into negative territory, and a redesign of Germany’s fragmented banking market wasn’t inconceivable. Cerberus is also an investor in Hamburg Commercial Bank, which was privatized in 2018.Unfortunately for Commerzbank’s shareholders, banking profitability will remain strained for some time. Loan losses from its core Mittelstand customers could hit profit as Covid-19 and trade tensions curtail economic activity. Zielke, who has hired McKinsey & Co. to review the business, has pledged deeper cuts. But getting buy-in to reduce jobs in the aftermath of a pandemic will be tough. Half of the bank’s supervisory board members are employee representatives, and job reductions need to be negotiated with a works council.Shareholder activism in banking hasn’t had much success, with attempts failing at Barclays Plc and UBS Group AG. Regulators need be won over to the cause, and in this case the government too. Cerberus going on the attack may be more about saving face with its own investors, but battling a German lender that anyone would struggle to turn around is a thankless task.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • The EMpower Top 20 Advocate Executive Role Models 2020
    Yahoo Finance UK

    The EMpower Top 20 Advocate Executive Role Models 2020

    This list celebrates senior leaders who are not people of colour but are dedicated to creating a more diverse and inclusive business environment for ethnic minority employees.

  • The EMpower Top 100 Ethnic Minority Executive Role Models 2020
    Yahoo Finance UK

    The EMpower Top 100 Ethnic Minority Executive Role Models 2020

    The ranking celebrates 100 senior people of colour who are leading by example and are removing barriers on the pathway to success for ethnic minority employees.

  • UK Finance boss quits over historic sexist comments
    Yahoo Finance UK

    UK Finance boss quits over historic sexist comments

    Stephen Jones has quit after details of 'deeply unpleasant comments' he made about Amanda Staveley in 2008 came to light in a High Court case.

  • Guess Who Outperforms World in Coronavirus Mayhem

    Guess Who Outperforms World in Coronavirus Mayhem

    (Bloomberg Opinion) -- Obscured by the myriad stories of coronavirus global devastation are three headlines from the continent with no shortage of epidemics, man-made and natural disasters. That would be Africa. Of its 54 countries, six are among the top 10 fastest-growing economies in the world this year. The continent is the favorite bazaar for appreciating equity after Eastern Europe and has one of the stock market's best-performing industries: communications. Africa finds itself with fewer Covid-19 cases than other heavily populated regions. Even after testing almost tripled to 1.2 million, the director of the Africa Centres for Disease Control and Prevention, John Nkengasong, said the continent's percentage is relatively small. Africa has the largest percentage of youth in the world, a higher average temperature and relatively more people outdoors most of the time, according to an April 28 report in the Financial Times.Although South Africa remains an outlier, with surging daily Covid-19 infections similar to the U.S rate, Ethiopia, Kenya and Nigeria reflect the continent's low percentage of cases relative to its population, according to Bloomberg News and the Johns Hopkins Bloomberg School of Public Health. Even as the U.S. daily infection rate based on population declines, the measure is still 24 to 46 times higher than in Ethiopia, Kenya and Nigeria.   The trend has its roots at the beginning of the 21st century, when another pandemic threatened much of the world. Ever since the 2002-2003 outbreak of severe acute respiratory syndrome (SARS), when the continent's sole infection was in Cape Town, Africa has leapfrogged the developed world in gross domestic product with a steadily growing share of global GDP, according to data compiled by Bloomberg.Most recently, some 38 economists who contribute to Bloomberg cut their 2020 forecasts for the world, from a 3% growth rate to a decline of 3.7%, while simultaneously predicting a much less precipitous slide for Africa: from 3% growth to a decline of 2.5%. If these forecasts prove accurate, Africa would be among the half-dozen best-performing 18 major regions in 2020, according to data compiled by Bloomberg.   Africa dominates the list with countries forecast to grow the most in 2020. Rwanda is projected at 3.2%, Ethiopia and Ivory Coast at 3%, Uganda at 2.8% and Ghana at 1.9%, according to data compiled by Bloomberg. That helps explain why stocks from North America, Western Europe and Asia Pacific contributed 3, 2 and 1 percentage points, respectively, to the world benchmark's 8% loss, and Africa contributed just 0.24 percentage point to the deficit. It remains the best performing region, similar to Eastern Europe (0.2 percentage point), according to data compiled by Bloomberg.While the world equity benchmark declined 4% in 2020, Africa lost just 1%. Communications companies in sub-Saharan Africa so far this year lead all industries in Africa with a total return (income plus appreciation) of 22% — more than twice the 9% earned by global health-care companies, the No. 1 performing industry in the world. Africa's appreciation in the stock market coincides with a similar rally by the continent in the emerging market for sovereign debt. After lagging much of the past two years, Africa's sovereign debt gained 24% since the beginning of April, or more than double the entire market's 10%, according to the Bloomberg Barclays Indexes.None of these achievements apparently were anticipated by some of the biggest investors, who retreated from emerging markets earlier this year when the coronavirus became a global pandemic. BlackRock, the largest money manager with $7.4 trillion of assets, allowed its Africa investments to decline 24% to $8.3 billion. Its Asia Pacific investment declined 20% to $115 billion, and its Eastern Europe valuation fell 31% to $9 billion, according to data compiled by Bloomberg.All of which shows that Africa is the biggest economic and financial surprise in these perilous times. \-- With assistance from Shin Pei, Richard Dunsford-White and Amine Haddaoui.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Matthew Winkler, Editor-in-Chief Emeritus of Bloomberg News, writes about markets.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Fed Doesn’t Really Need to Buy Corporate Bonds

    Fed Doesn’t Really Need to Buy Corporate Bonds

    (Bloomberg Opinion) -- The Federal Reserve realizes that it doesn’t have to buy U.S. corporate bonds, right?I ask this question only somewhat in jest. In a surprise move, the central bank announced Monday that it would start to buy individual company bonds under its $250 billion Secondary Market Corporate Credit Facility, specifically by following a diversified index of U.S. corporate bonds created expressly for its program. “This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility’s minimum rating, maximum maturity and other criteria,” the Fed said in a statement. Notably, issuers of bonds acquired through this program don’t need to provide certifications, unlike the stipulations for individual debt purchases. It’s not immediately clear why this is necessary, nor how this will impact markets any differently than the facility’s current purchases of exchange-traded funds. So far, the secondary-market vehicle has bought about $5.5 billion of ETFs. As my Bloomberg Opinion colleague Tim Duy quipped on Twitter, it’s as if policy makers said “we want to expand beyond ETFs, so we will purchase individual bonds such that we mimic an ETF.”Predictably, the largest investment-grade bond ETF, ticker LQD, surged in the wake of the announcement to its biggest intraday gain since April 9. That was the day the Fed changed the parameters of its credit facilities to allow for purchases of high-yield ETFs and debt from fallen angels that were investment grade as of March 22.The most surprising part of this is there is virtually no evidence that the corporate-bond market needs this kind of intervention — it has been working nearly flawlessly for months. Sure, the credit ratings of several brand-name companies have been lowered since Covid-19 started to spread across America in March. Some even fell into junk, like Ford Motor Corp., Kraft Heinz Co. and Macy’s Inc. For countless others, their business model has radically changed for at least the next several months, if not years.And yet the average yield demanded by investors for investment grade debt fell last week to just 2.23%. On March 6, the rate was 2.22%, the lowest ever in Bloomberg Barclays data going back to 1972. On that day, the benchmark 10-year Treasury yield tumbled as much as 25 basis points to a record low and closed at 0.76%, while investment-grade bond spreads widened to 144 basis points in what was the credit market’s worst day in a decade. By contrast to those volatile bouts, the move lower in corporate yields during the past few weeks could be described as nothing short of orderly, with average all-in rates falling or staying constant for 21 consecutive trading sessions through June 10 and never dropping by more than 9 basis points at a time.One reason for this type of indexed buying might be that the central bank is worried about the overall leverage levels of corporate America. A Fed report released last week showed U.S. nonfinancial business debt, which includes bank loans and corporate bonds, increased in the first quarter by the most in records dating back to 1952. Firms added $754.8 billion of debt, equivalent to an 18.8% annualized rate, in the first three months of the year. Now with $16.8 trillion of borrowing, nonfinancial corporations have more debt outstanding than all American households.At first glance, that seems rather obvious. That time frame roughly coincides with companies rushing to raise cash and stave off imminent liquidity problems as the coronavirus crisis reached a zenith. But the first quarter also included a period of about two weeks in late February and early March in which the U.S. corporate bond markets were closed in the primary market’s longest drought since July 2018. In total, investment-grade companies borrowed about $479 billion in the first three months of the year, according to data compiled by Bloomberg. In April and May alone, they combined to issue more than $528 billion of debt. While this month isn’t shaping up to be quite as busy, companies reeling from the pandemic like Delta Air Lines Inc. and Royal Caribbean Cruises Ltd. have been lured back to the bond market, given the favorable conditions. All this has happened, of course, without the Fed’s credit facilities purchasing a single bond. Private investors have been more than willing to pick up the slack, pouring $14.6 billion into funds that buy U.S. investment-grade debt, high-yield bonds and leveraged loans in the week that ended June 10, the second-highest inflow on record behind the $15.6 billion added in the week ended June 3, according to data from Refinitiv Lipper.The weeks of record inflows make the Fed’s rush into corporate bonds all the more puzzling. As it stands, the facility will stop purchases no later than Sept. 30, “unless the Facility is extended” by the Fed and Treasury Department. That’s a huge caveat. Why not save the firepower for when — or if — it’s needed? Especially with so much extra room to go in buying ETFs?According to Bloomberg News’s Christopher Condon and Craig Torres, the Fed built the index internally, and a spokesman couldn’t immediately say whether its details would be made public. The central bank added that it could slow or even pause purchases if market functioning showed sustained improvement.I’m not sure what more the Fed wants to see. Obviously, corporate executives have been happily reaping the benefits from the wide-open primary market and locking in rock-bottom interest rates. Now with the central bank in play as well, expect investment-grade yields to soon set record lows.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Is the Barclays share price too cheap to ignore?

    Is the Barclays share price too cheap to ignore?

    The Barclays share price was hit just as hard as Lloyds' when Covid-19 struck. But it's coming back stronger, and here's why I'd buy.The post Is the Barclays share price too cheap to ignore? appeared first on The Motley Fool UK.

  • Wall Street Puts Guardrails on LBO Deals After Crisis Markdowns

    Wall Street Puts Guardrails on LBO Deals After Crisis Markdowns

    (Bloomberg) -- Bankers who finance leveraged buyouts are helping private equity firms tiptoe back to the credit markets. But they’re not buying into the recent euphoria.Many of Wall Street’s biggest underwriters were forced to mark down the value of their loan portfolios as the pandemic sent stocks and other risk assets into a tailspin in March, leading to a nearly two-month freeze in dealmaking. As conditions improve, the lenders are building better protections into LBOs they sign up for, including those for Spanish phone provider Masmovil Ibercom SA and pet products company Radio Systems Corp.Their newfound caution may seem at odds with the ebullient state of credit markets. Junk bonds have recouped nearly all of their losses this year, and more than $100 billion of the high-risk securites have been sold since the beginning of April. But for debt with the lowest ratings -- the jet fuel in private equity deals -- the rebound has been slower, keeping lenders on edge.The leveraged loan market, long favored by private equity firms to fund LBOs, has also lagged. The largest buyers of the debt -- vehicles known as collateralized loan obligations -- are not purchasing as much as they used to as they deal with the wave of downgrades that has hit many of the companies they already hold.New VintageOnly a handful of new buyouts have been announced since the March meltdown, including the Masmovil deal and Clayton Dubilier & Rice’s acquisition of Radio Systems, which makes dog-training collars.Terms on those deals, as well as others that are still being negotiated, paint a clear picture of banks’ wish lists for Covid LBOs: less leverage, more bonds and greater flexibility to sell the debt at steep discounts if needed.The around 3 billion euros ($3.39 billion) of secured debt that banks agreed to provide to KKR & Co., Cinven and Providence Equity Partners for Masmovil consists mostly of high-yield bonds and allows banks more leeway than usual to adjust pricing and structure through syndication, according to people with knowledge of the matter who asked not to be named because the terms are confidential.Barclays Plc, BNP Paribas SA and Morgan Stanley provided the initial debt commitments, though more banks are expected to be added to the group later, the people said.CD&R had initially sought to finance its acquisition of Radio Systems with first- and second-lien loans and leverage of over six times a measure of earnings, according to a separate person. It later pivoted to an all-bond structure that puts leverage closer to five times, the same person said. A group of banks led by UBS Group AG ultimately agreed to provide financing for the deal.Representatives for Barclays, BNP Paribas, Cinven, KKR, Masmovil, Morgan Stanley, Providence and UBS declined to comment. CD&R and Radio Systems didn’t respond to requests for comment.Big BuffersTo avoid eating into the fees they earn to underwrite the debt or, in the worst-case scenario, taking outright losses, banks have been including bigger buffers, known as market flex, into the terms of their commitments.Banks are seeking flexibility to syndicate loans at rates that are as much as two percentage points higher than those they initially indicate to borrowers, compared to 1.25 to 1.50 percentage points of flex before Covid, the people said.With investors demanding lower initial prices on risky debt, the type of loans that banks used to backstop at around 97 cents on the dollar are now being underwritten in the low 90s, the people said. Big discounts can be particularly attractive to CLOs that are looking for quick returns on newly issued debt to repair their portfolios.For bonds, the interest rates that determine when banks start eating into their fees have risen to 11% or 12%, even for secured notes, compared to below 10% before Covid, they added. That’s even as other LBO bonds currently trade at yields of around 8%.Still WorriedBankers first turned cautious in late February, when the virus was already spreading through Europe but before any shutdowns began in the U.S.One of the last deals to be signed during that time, a $295 million loan for CD&R’s acquisition of British health-care services company Huntsworth Plc, was also underwritten in the low 90s, some of the people said.Royal Bank of Canada and Barclays funded the deal in May to allow the acquisition to close and may bring it to the broadly syndicated market over the coming weeks, according to one of the people. Representatives for RBC and Huntsworth declined to comment.Read more: Wall Street warning to corporate America: get cash while you canBankers’ reluctance to loosen underwriting terms as markets have rebounded shows that much of Wall Street is still worried about new spikes in volatility and the pace of the economic recovery amid signs the virus is still spreading.They have reason to be cautious.A group of banks led by Jefferies Financial Group Inc. is beginning to market a $945 million loan for TSG Consumer Partners’ purchase of Pathway Vet Alliance after being forced to fund the deal with their own cash earlier this year, according to people with knowledge of the matter. Representatives for Jefferies and TSG didn’t immediately respond to requests for comment.And two of the largest commitments that were signed before Covid-19 -- $9.4 billion of debt for the buyout of Thyssenkrupp AG’s elevator unit and $7.2 billion of loans and bonds for Eldorado Resorts Inc.’s acquisition of Caesars Entertainment Corp. -- are still stuck on banks’ books.(Updates with Pathway loan launch in penultimate paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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