Week InReview | Bond issuers & investors flock to sell dollar-denominated debt | Options seen as limited for U.S. to battle next financial crisis | A tale of two liquidities for the bond market | Who stands to lose the most in emerging markets? | The secret to writing secure code & more in Binge Reading Disorder
Friday, August 28, 2015
It's not easy being green (back-denominated)
As bond issuers & investors are about to find out
(Aug 24) Both EM countries and companies in emerging markets flocked to sell dollar-denominated debt, with the Bank for International Settlements estimating that total dollar borrowing could now stand at as much as $9 trillion. With the commodities complex now crumbling and the decline in EM currencies on the verge of surpassing that of the 1998 Asia financial crisis, it would seem natural to worry about how these bonds will fare in the face of two intense pressures. These are not levels that we would generally associate with any meaningful levels of distress at a time when underlying commodities and currencies are suggesting otherwise.
Options limited for U.S. to battle next financial crisis
CBO: Treasury to exhaust borrowing ability by Nov. or Dec.
(Aug 26) Stock market and commodity price declines are sweeping the globe, raising a question: If the U.S. economy lands in another hole, what tools does it have to dig itself out? Congressional Budget Office said it expects Treasury Department to exhaust its ability to sell debt under current debt ceiling sometime in November or December. U.S. debt stands at 74 percent of gross domestic product, compared with 35 percent in 2007, based on a Congressional Budget Office report released August 25. That burden is expected to grow further in coming years, limiting government options for additional fiscal stimulus in the form of spending or lower taxes.
It was the worst of times, it was the worst of times
Bond market liquidity is a worry for all seasons
(Aug 26) There are two ways for illiquidity to manifest itself: gradually, and suddenly. The sudden form of illiquidity puts the emphasis on "without causing a change in the asset's price": If you want to sell your stock, and you sell it a second after you make that decision, but it's down 20 percent from where it was two minutes ago, you could plausibly complain about illiquidity. The gradual form of illiquidity, on the other hand, puts the emphasis on "ability to facilitate the purchase/sale." If you want to sell your bonds, and you can't sell at a price that you're willing to accept, then you might also complain about illiquidity.
Extended rout in emerging markets
Who stands to lose the most?
(Aug 24) As of March, cross-border exposures -- including loans and derivatives -- stood at more than $4 trillion, according to the Bank for International Settlements. If loans start going bad and losses mount, will there be another financial crisis? It's hard to know. If the losses are spread widely among investors who can afford to take a hit, no problem. If they're concentrated in large, thinly capitalized banks, that's more troubling.
Binge reading disorder
Hand-curated, chosen with love
  • Decade-Old Contest May Unlock Secrets to Writing Secure Code (Christian Science Monitor)
    Why Some Billionaires are Bad for Growth, and Others Aren't: Not All Inequality is Created Equal (WaPo)
  • Turns Out Sarcastic People Really Are Better at Everything: Maybe It's Okay to be That Guy in the Office. (Esquire)
  • American Economy Blues: Everything You Need to Worry About (Or Not) (Fortune)
  • Art Collectors Were Busy Looking for Liquidity During Market Rout (Bloomberg)
Transparency.
Inclusiveness.
Consensus.