Archivo de la Categoría ‘Financial Markets’


This blog discloses a letter sent to the president of the Spanish Government on a Proposed Spanish retroactive reduction of solar PV feed-in tariffs. This is an example of how international investors(US, Germans, Middle Easterns, etc) would never think about investing in this country if Minister Sebastian goes ahead with his «Venezuela-Chaves style» retroactive proposal.

I would appreciate if Moody´s, Standard and Poors and Fitch analysts could review their AA opinion about our country. We should be in credit watch negative once again. Regrettably I strongly believe we do not deserve a AA anymore because our legal insecurity is only comparable to North Korea and their peers in China and Venezuela.

I opine that NO retroactive amendments to Royal Decrees is a must in the «to do list» in order to be a proper and fit AA developed country.

Many moons ago I forecasted a downgrade from AAA to AA. Now I do forecast a new downgrade to A that would translate into a cost of debt increase of at very least 0.50%/0.75% (credit spread premium over Germany).

This new piece of information about Spanish senior officials proposing a a retroactive change to Royal Decrees (Reales Decretos) just like that makes me wonder our huge legal insecurity once again.

See letter below.

Presidencia del gobierno
Complejo de la Moncloa
Avda. Puerta de Hierro, s/n.
28071 Madrid

D. José Luis Rodríguez Zapatero, President of the Spanish Government
Copy to: D. José Enrique Serrano, Chief of Staff of the Presidency
Madrid, May 27, 2010

Subject: Proposed Spanish retroactive reduction of solar PV feed-in tariffs

Dear President,
We are a group of international investors and investment managers who invest longterm
capital on behalf of global pension funds and insurance companies whose beneficiaries
are millions of workers – both governmental and private – around the world. Collectively we
hold investments in Spanish solar photovoltaic projects with a value of about €3 billion.

These projects have been financed with nearly €400 million of our clients’ and shareholders
funds and with approximately €2.6 billion of loans from Spanish and European banks. Our
investors seek low-risk, regulated assets, thus we made these investments relying on the
regulatory assurances of the Spanish Government that the Solar PV tariff under Royal Decree
661/2007 would not be changed or reduced during the life of these projects.

In recent weeks, it has been reported that the Spanish Government might be considering to a
reduction in the Royal Decree 661/2007 tariff for legally built and operating projects,
including those owned by us. Having followed previous tariff negotiations for new renewable
energy projects, we are inclined to believe that such an outcome is not likely. However, as
the Spanish Government has not publicly ruled out retroactivity, we have heightened
concerns that Spain may in fact be considering such an unprecedented and potentially
damaging step. We want to register our strongest possible objection to the consideration of
any such retroactive reduction. It would result in the loss of all or nearly all of our
shareholders’ funds and clients’ pension and insurance funds invested in the equity of these
projects. A substantial portion of the debt funds lent by international and Spanish banks
(including some of the more constrained Cajas) would also be lost and it could have very
serious long-term ramifications for Spain’s ability to attract foreign investment.

We understand that that an unprecedented retroactive change is potentially warranted
because based on mistaken beliefs of “excessive profitability,” a contribution to the “tariff
deficit,” and “swindles and poor practices in the sector.” These assertions are neither
accurate nor warranted and certainly do no apply to our investments. Rather, we call your
attention the following facts surrounding investment under the Royal Decree 661/2007 tariff:

– Solar and wind projects have higher capital costs, but lower operating costs than
conventional power generation. Feed-in tariffs such as those defined in Royal Decree
661/2007 are provided to attract the lowest cost of capital, and to compensate
investors for the substantial risk of large amounts of capital exposed to long-term
repayment from equipment performance and the resource meeting the predicted
level. Without the confidence that capital will be repaid with reasonable profit
offered by the tariff, investors will not invest.

– Our investments were based on market conditions and equipment prices at the time
when the investments were made, not today’s market. That solar PV costs have
fallen since we made our investments is neither a relevant nor logical argument.
Capital expenditures of solar projects are front-loaded and once the project is
constructed installation costs and potential returns are locked in at that time. In fact,
our early investment to support Spain’s renewable energy policy was the foundation
for the technological improvements and efficiencies of scale that allow new projects
to enjoy lower costs today. This initial investment has created the possibility of tariff
reductions for future projects, effectively reducing costs to consumers. Critical to us
in making these pioneering investments was Spain’s promise of long term, stable
regulation and profitability assumptions based on equipment costs and technology
risks at the time.

– Spain has a “tariff deficit” in large part because it is currently choosing not to pass on
to consumers the full cost of either conventional or renewable energy. Of the
accumulated deficit of €17 billion as of December 2009, ca. €3.5 billion is
attributable to special regime generation, primarily wind. The balance is
attributable to system balancing costs and a decision not to pass on high oil and gas
costs in 2007 and 2008. Solar PV is not the underlying problem and is being unfairly
targeted when the real issue lies elsewhere.

– We have heard that certain promoters may have secured the Royal Decree 661/2007
tariff illegally. This is not the case with us. We operate to the highest financial, legal
and operating standards. Investors and promoters who acted lawfully should not be
penalized for the actions of those who did not.

We believe that there are serious implications to Spain of a retroactive tariff change. We are
sure that these have been considered, but in the event that they have not, they could very
well include:

1. Loss of Investor Confidence in Spain.
Our investors include many of the largest pension funds, insurance companies and
sovereign wealth funds in the world. In addition to investments in renewable energy
through us, they make other investments in Spain and Spanish companies – Spanish
government bonds, Spanish corporate bonds and listed and private Spanish equities.
They are aware of the threatened changes and the impact on their investments. They
have made it clear that we should not seek further investments in Spain until the matter
is settled, and make no further investments if retroactive changes are made because it
would lead them to conclude that Spain does not offer a stable regulatory environment
or is respectful of foreign investment. Thus, investment decisions are being delayed
whilst this uncertainty persists and in the absence of decisive action by the Spanish
Government to clarify that such a step will not be taken.

2. Higher Borrowing Costs and Reduced Share Prices.
If a change is made, investors may either stop investing in Spain, or demand higher
returns for the increased risk of investing in Spain. This would be a market-wide reaction,
beyond the investors that we represent. It is likely to manifest itself in two ways. First,
the interest charges for Spanish sovereign and corporate debt will increase. This will
exacerbate Spain’s deficit funding costs and the borrowing costs, and therefore
profitability, of Spanish companies. Second, it may lead to sales in listed Spanish shares,
especially in the utility and infrastructure sectors where long-term stability is essential.
This could significantly reduce the value of shareholdings by Spanish investors, including
Spanish individuals and pension and insurance investors.

3. Loss of investor confidence in renewable energy in all EU countries.
Across the EU, countries are trying to raise capital for renewable energy and low carbon
projects. Raising that capital depends on stable regulation, including stable feed-in
tariffs. Many consider long-term, stable feed-in tariffs the best mechanism to attract the
lowest cost capital to meet the EU’s renewable energy targets. If Spain were to
retroactively change the Royal Decree 661/2007 tariff, investors are likely to assume that
other countries may follow Spain’s example. There is a possibility therefore that action
by Spain will result in reducing investment across Europe, threatening delivery of the
European Commission’s and member states’ renewable energy and climate change

In short, although it may appear a small action, any retroactive tariff change could have
significant negative ramifications for Spain. The mere discussion of such a change at high
government levels is already undermining confidence in Spain as a place for foreign direct
investment. We are already advising our investors and their Governments of the risk, and
enlisting their strongest diplomatic protests. We are not the source of Spain’s tariff deficit or
other issues, and should not be made to pay for them.

We accept that due to recent cost reductions in technology arising from PV investments in
recent years (which we were part of funding), there should be a managed and reasonable
reduction to the tariff for new solar projects. We support such changes. However this is not
relevant to our existing investments which were made in a different time, and at a different
cost base. We also are willing to cooperate with different improvement initiatives, such as
improved monitoring of the PV fleet and grid management with Red Electrica, R&D initiatives
and closer coordination with the local industry and relevant administrations.

We urge you to promptly and publicly repudiate any retroactive change of the 661 Tariff.
Speedy action is needed to maintain general investor confidence in Spain. Without such a
statement investor confidence will continue to fall and we will clearly have no choice but to
suspend new investment activity and continue to advise our investors of the possible change
under consideration. We will continue to pursue other avenues at our disposal to dissuade
Spain from such a change and should the change occur we will certainly pursue all legal
avenues to seek full compensation for any losses that arise. We do not consider this a matter
of scale or negotiation. We understand that some officials have been reported to be
discussing how much the Royal Decree 661/2007 tariff could be cut. Our unambiguous
position is that no retroactive reduction is acceptable. Any change would undermine our
confidence in Spanish regulatory frameworks going forward with all the attendant
consequences discussed earlier in the letter.

Antonio Rivela
IE Business School
Finance Associate Professor
International MBA


Informes periciales sobre swaps o productos estructurados

Escrito el 27 mayo 2010 por Antonio Rivela Rodríguez en Analisis Financiero, Financial Markets

El año 2010 se recordará como uno de los años con más litigios en los tribunales con asuntos relacionados con: Madoff, bonos emitidos por Lehman, contratos de permuta financiera (swaps), fondos hedge que no han devuelto la liquidez, etc.

Para tener posibilidades de éxito en un juicio se requiere una figura que transmita los conocimientos financieros sofisticados a los jueces y letrados de forma asequible y fácil de entender: El perito legal.

En el campo de los derivados existen muy pocos peritos legales con experiencia real en el campo de la estructuración e ingeniería financiera por una razón muy simple, si tienes experiencia en estructuración y trabajas para JP Morgan ganas 10 veces más que siendo un humilde perito o consultor.

Por ello, se dan muchos casos de peritos firmando informes periciales que provienen de la auditoría (KPMG, Deloitte, etc.) o profesores teóricos del mundo de la universidad.

Los primeros dan un enfoque contable a un problema que no tiene nada que ver con contabilidad sino con las finanzas. La valoración de productos estructurados se lleva a cabo con modelos muy sofisticados de ingeniería financiera que han merecido al menos la mitad de los últimos premios nóbel de economía. Son modelos que para ser entendidos con perspectiva necesitan de conocimientos matemáticos a nivel de ingeniería o doctorados en matemáticas.

Por otro lado los profesores de universidad teóricos, si bien dan una buena imagen de neutralidad ante los jueces, son eso: teóricos, y desconocen la praxis del mercado, con lo que sus informes suelen ser sartas de citas a investigadores sin mojarse en ir al punto álgido o aludiendo a informes catastrofistas que nadie que trabaje en mercados tomaría en serio.

Es por ello que se requiere para desempeñar esta función una figura híbrida entre la banca de inversión y el enseñanza por la doble vertiente: técnica y formativa del asunto en cuestión. De la misma forma sería bueno que los jueces de lo mercantil se formen en este área que tantos litigios va a traer a las salas en los próximos años.

Una de las mejores consultoras en finanzas en España es A.F.I. – analistas financieros internacionales, pero no suelen tomar  partido en contra de las instituciones financieras ya que éstos son sus mejores clientes.

Otra de las mejores consultoras especializadas en ingeniería financiera es netvalue consultores, que se especializa en los productos más complejos (exóticos) y en informes periciales de productos estructurados, derivados, contratos de permuta, etc.

Finalmente Inverseguros está más centrada en el colectivo de compañías de seguros y en la valoración de sus activos financieros, los cuales suelen tener vencimientos largos (cupones cero cancelables, etc), y no tanto en la vertiente más exótica de los productos.

Sería aconsejable que los participantes de este entramado encargado de velar por la seguridad jurídica de este apasionante sector se «culturicen» cada vez más con los conceptos de swaps, productos estructurados, SPVs, etc.

Antonio Rivela


European Sovereign Debt for «Dummies»

Escrito el 11 mayo 2010 por Antonio Rivela Rodríguez en Financial Markets

Yes. I like demagogy… but its fun and all the financial info depicted in the graph is very real.

See you next…

By the way, Demagogy or demagoguery (Ancient Greek δημαγωγία, from δῆμος dēmos «people» and ἄγειν agein «to lead») is a strategy for gaining political power by appealing to the prejudicesemotionsfears and expectations of the public—typically via impassioned rhetoric and propaganda, and often using nationalistpopulist or religious themes. What qualifies as demagogy has been the subject of debate and ambiguity since Aristophanes first used the term, in reference to Cleon.


Esta es una historia real que ha ocurrido durante la semana santa. Esta redactada como un cuento para facilitar su lectura pero es real como la vida misma. Sólo he cambiado algún nombre para no mencionar a los personajes que la protagonizaron.

José Pérez es el director financiero de una promotora de energía solar radicada en el norte de España.
Son las 12 de la mañana y faltan dos días para ir al notario a firmar el ansiado préstamo de diez millones de euros que le han autorizado.
José lleva negociando con el Banco Sabadell desde hace tres meses, y tras haber superado tres procesos de aprobación de riesgos de crédito las cree tener todas consigo para obtener la ansiada línea de crédito que le permitirá seguir promoviendo parques de energías alternativas en Castilla La Mancha.

¿De dónde saca el dinero el Banco?

La liquidez no proviene del balance del banco catalán sino de las conocidas líneas ICO que todos los españoles pagamos con nuestros impuestos. Habiendo dicho esto, el riesgo de crédito sí es soportado por la institución financiera de Sabadell que cobra 200 puntos básicos (2%) sobre el euribor para hacer frente a posibles riesgos de impago.

El ICO no autoriza a que se cobren al cliente final comisiones de formalización del préstamo, lo que hace que el departamento de Project Finance del Banco Sabadell se ponga a trabajar en un plan para «rejonear» al cliente como si no hubiera mañana.

El plan no consiste en ingeniería financiera de «alta banca» al estilo de los legendarios Black y Scholes sino a una triquiñuela digna de la película argentina «9 Reinas» de mi amado Ricardo Darín.

Por cierto, ya que no se va a arreglar el panorama bancario de este país, por lo menos os recomiendo que vayais a ver la gran película.

Pero… volvamos a José Pérez, que se encuentra conduciendo hacia una ciudad del norte de España mientras recibe una llamada de su banco «amigo» para plantearle un último escollos.

Ring, ring!
«José…. ?»
«Hombre… María… qué tal todo? firmamos después de semana santa no?» (sucursal del Sabadell de empresas)
«Nada, sólo para comentarte que tienes que cerrar un swap o cobertura de tipo de interés al 3.88% para que te concedamos el préstamo».
«Pero María, si esto está aprobado y ya hemos pasado tres comités de crédito».
«Ya conoces a los de project… a lo cierras o no hay cash! Ahora te mando el CMOF para que lo mires» (CMOF: Contrato Marco de Operaciones Financieras)
«Entendido. Déjame que le pase los detalles a un amigo profesor del IE Business School que da clase de derivados a ver que me cuenta».

Curiosamente, el amigo, que escribe estas líneas, valora el swap desde su ordenador personal mientras disfruta de sus merecidas vacaciones en una localidad granadina. Una vez que termina de perfilar el el modelo del producto financiero utilizando Visual Basic y Matlab exclama para sí mismo «Menudos hijos de….» y llama a su entrañable amigo Pepe.

O tienes un amigo experto en derivados o no es sencillo evitar que te pase esto. En España existen muy contadas consultoras financieras serias especializadas en valoración de derivados, aunque destacan dos: AFI y netvalue consultores.

Ring, ring.
«Pepe! qué pasa!»
«Hombre Toño que haces?»
«Nada… aquí echando unas horillas…. Te cuento, te la están metiendo doblada»
«Qué me dices hombre?»
«Si. Acabo de valorar tu derivado y te quieren cobrar EUR 140,000 de margen.»
«Queeeeeeeeeeeeeeeeeeeeeeeee?» (A Pepe se le cae el iphone de sus manos). Siento por hacer publicidad de su teléfono pero alguien tenía que decirlo.
«Si. Acabo de poner precio al swap. No hay duda. Con la curva de ayer. Contrato a plazo forward 1 año. recibes flotante y pagas fijo 3.88»
«Pero…. Toño: (Pepe coge aire)» «¿Has tenido en cuenta el nocional decreciente?»
«Si claro Pepe. El nocional sigue el perfil de un préstamo francés de cuotas constantes. Lo clavo con dos decimales».

«Serán cabro…»…. Despúes de tres meses, me llaman dos días antes de cerrar, me obligan a cerrar una cobertura de tipos de interés y encima me meten 35 puntos básicos en un producto que tiene un mercado estándar de 1,5 puntos básicos» (Para lectores no entendidos, 20 veces  el márgen estándar del mercado institucional).

«Sí Pepe… lo estás interpretando bien. Como asesor y amigo, pero sobretodo como amigo, te recomiendo que te borres el teléfono de estos señores de tu iphone»

Ring, ring.

«Toño… espera, te tengo que dejar que curiosamente tengo al Santander y a Banesto para lo mismo»….

En resumen. Lo he escrito con sorna porque es Semana Santa y no tenía pensado meteros un tostón sobre renta fija pero esto es un ejemplo real de las prácticas abusivas que están llevando a cabo los bancos españoles con el dinero de…. los españoles!

Espero que haya algún regulador leyendo estás líneas, y que se tomen medidas de una vez para evitar la asimetría de información que existe en el mercado de derivados, y por ende, las prácticas abusivas que sufren las empresas industriales en España.

Tampoco vendría mal que el ICO ponga fin a estas actividades dignas de ciertos barrios bonaerenses.

Las instituciones financieras se pelean entre ellas con armamento parecido, pero en cambio, la lucha entre una institución financiera y una firma industrial se parece más a un partido entre el F.C. Barcelona y el legendario Recreativo de Peñaranda de Bracamonte, pero estaría bien que no fuera con el beneplácito del gobierno.

Antonio Rivela dixit


High Yield beats Investment Grade Debt

Escrito el 12 marzo 2010 por Antonio Rivela Rodríguez en Financial Markets

For the sake of clarification, High Yield (HY=Junk Bonds) holds BBB- rating and Investment Grade (IG) enjoys higher or equal than BBB-.

For example GM and Ford are High Yield because they were downgraded in 2005 from BBB to BB.

Why is HY beating IG?: Very Simple. It does not come as a surprise to market participants.

HY trades at libor+5% / libor+10% levels. So going from 10% to 4% is a 6% annualised which in 10 years is 48%/50% !

See below an interesting Bloomblerg article on HY vs IG.

March 12 (Bloomberg) — High-yield, high-risk bonds are beating investment-grade debt for the first time this year as confidence in the U.S. economic recovery gains strength.

Speculative-grade notes returned 1.93 percent this month, bringing year-to-date gains to 3.63 percent, according to Bank of America Merrill Lynch index data. That compares with a 2.32 percent return in 2010 for investment-grade bonds. The junk index is being led higher by companies including Freescale Semiconductor Inc. and Energy Future Holdings Corp., formerly TXU Corp.

Lenders to the neediest borrowers are willing to accept the lowest relative yields since January as confidence in the global economy spurs Morgan Stanley to boost its growth estimate for 2010 to 4.4 percent from 4 percent. Speculative-grade credit rating upgrades by Moody’s Investors Service are poised to outpace downgrades for the second consecutive quarter, the first time that’s happened since 2006, Bloomberg data show.

“It’s a yield grab,” said Jack Iles, an investment manager at MFC Global Investment Management in Boston who helps oversee $4 billion in fixed-income assets.

The extra yield investors demand to own high-yield bonds instead of Treasuries has narrowed for nine straight days to 6.15 percentage points, the longest streak of spread tightening since August, Bank of America Merrill Lynch data show. The spread had widened to 7.03 percentage points on Feb. 12 from 6.39 percentage points in December on concern the fallout from Greece’s budget deficit, Europe’s biggest in terms of gross domestic product, would slow the global economy.

‘Bit of a Stumble’

“Risky assets took a little bit of a stumble from January to mid-February and that was by and large wrapped up with concerns over sovereign debt,” said Christopher Garman, president of Orinda, California-based Garman Research LLC. “Those concerns seem to have more or less faded.”

Emerging-market and high-yield bond funds each took in more than $1 billion in the week ended March 10, EPFR Global said, the biggest amount since the research firm began publishing weekly data on the sectors a decade ago.

Elsewhere in credit markets, Lyondell Chemical Co. said it plans to raise $6.05 billion in bonds, loans and equity to repay debt after it emerges from bankruptcy protection. The chemical maker, based in Houston, is seeking $3.25 billion by selling senior secured bonds and borrowing through a senior term loan, according to a statement yesterday. It also plans to raise $2.8 billion in a rights offering.

Fannie Mae

Fannie Mae sold $6 billion of debt, its biggest offering of benchmark notes since last April, as the company boosts borrowing and cuts holdings to fund about $130 billion of planned purchases of delinquent loans from the mortgage securities it guarantees. The 3-year debt from the government- controlled mortgage company yields 1.803 percent, or 31 basis points more than similar-maturity Treasuries, Washington-based Fannie Mae said in a statement.

CLP Holdings Ltd., Hong Kong’s biggest electricity supplier, plans to sell about $500 million of 10-year bonds today priced to yield about 125 basis points more than similar- maturity U.S. government debt, according to a person familiar with the matter.

U.S. commercial paper outstanding rose $11.2 billion to $1.14 trillion in the week ended March 10, after declining by $20.4 billion in the previous period, the Federal Reserve said on its Web site. Commercial paper, which typically matures in 270 days or less, is used to finance everyday activities such as payroll and rent.

Spread Narrows

The spread on corporate bonds over government debt fell yesterday to 158 basis points, or 1.58 percentage point, the lowest this year, from as much as 174 basis points Jan. 4, the Bank of America Merrill Lynch Global Broad Market Corporate Index shows. Yields averaged 4.044 percent.

Companies took advantage of the drop in spreads to sell more bonds. Corporate borrowers in the U.S. issued $36.4 billion of notes through yesterday, compared with $21 billion in all of last week, according to data compiled by Bloomberg. It was the most since the week ended Jan. 5, when $46.6 billion was sold.

Investment-grade companies in Europe sold 19.2 billion euros ($26.5 billion) of bonds this week, almost double the amount raised the week before, Bloomberg data show.

Bond Risk Falls

The cost to protect against corporate bond defaults in Europe fell today, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly high-yield companies dropping 10 basis points to a two-month low of 408, according to JPMorgan Chase & Co. prices.

The European index soared to 506 basis points Feb. 16 at the height of investor concern Greece wouldn’t be able to rein in the region’s largest budget deficit. Credit swaps on Greek government bonds rose 5 basis points to 307, against a record- high 428 reached on Feb. 4, CMA DataVision prices show.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan increased 2 basis points to 93.5, Royal Bank of Scotland Group Plc prices show. In Tokyo, the Markit iTraxx Japan index fell 1.5 basis point to 120.5, on course for its lowest close since Jan. 12, according to CMA and Morgan Stanley prices.

The Markit CDX North America Investment Grade Index, which is linked to 125 companies, climbed 0.5 basis point to 83.5 yesterday, according to broker Phoenix Partners Group. The credit-swaps gauges typically rise as investor confidence deteriorates.

Credit-default swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point is 0.01 percentage point and equals $1,000 a year on a contract protecting against default on $10 million of debt for five years.

Credit-Swaps Regulation

Central clearing of derivatives including credit-default swaps will come under scrutiny as part of efforts to safeguard the European Union’s financial system. At a meeting on March 22, EU nations and the European Commission will examine ways to cut the risk in the event that one of the parties to a derivatives contract can’t meet its obligations, according to a document obtained by Bloomberg News.

Clearinghouses for swaps transactions should be open to any firm that wants to process trades in the $300 trillion U.S. market, according to Commodity Futures Trading Commission Chairman Gary Gensler.

“Clearinghouses should not be allowed to discriminate between or amongst the trades coming from one trading venue or another,” the chairman said in prepared remarks at the Futures Industry Association conference in Boca Raton, Florida.

Signs that the U.S. economy is improving are bolstering demand for speculative-grade securities, according to Martin Fridson, chief executive officer of money manager Fridson Investment Advisors.

‘Healthy Appetite’

“There is a healthy appetite for risk,” Fridson said. “There is a fading of concern over Greece and more upbeat economic numbers.”

Morgan Stanley expects “above-consensus global GDP growth,” raising the projection from December, “despite growth downgrades in Europe,” a weaker first quarter in the U.S. and “recent softening” in a China manufacturing index, the firm’s economists said March 10.

The Organization for Economic Cooperation and Development said March 5 its leading indicator, which signals the direction of the economy, reached the highest in almost 31 years in January.

The measure increased by 0.8 point to 103.6 from 102.8 in December, the Paris-based organization said. January’s reading was the highest since May 1979. Gains on the month were led by Japan, the U.S., Canada and Germany, the OECD said.

High-Yield Spreads

High-yield spreads will narrow to 4 percentage points by yearend as defaults plunge, according to Garman. Moody’s predicts the speculative-grade default rate will decline to 2.9 percent by the end of 2010 from 11.6 percent in February. The rate fell from 12.5 percent in January.

The worst-rated bonds are performing the best this month. Securities ranked CCC and lower have gained 2.77 percent while BB rated notes, the highest junk tier, have returned 1.81 percent, Bank of America Merrill Lynch data show. High-yield securities are rated below Baa3 by Moody’s and lower than BBB-by Standard & Poor’s.

Bonds of Freescale, the computer chipmaker bought by firms led by Blackstone Group LP, have climbed 5.36 percent on average and debt of Energy Future, the power producer taken private by KKR & Co. and TPG, has returned 4.27 percent, Bank of America Merrill Lynch data show. Austin, Texas-based Freescale is rated Caa2 by Moody’s and B- by S&P. Dallas-based Energy Future is rated Caa3 and B-, respectively.

New Issues

The bonds are rallying in part because the unthawing of the new issue market has given the riskiest companies the ability to refinance their debt, said MFC Global’s Iles.

“The reopening of the new issue market was huge for these guys,” Iles said. “The ability for companies like TXU to restructure even part of their balance sheet is much better than it was even six months ago.”

Lisa Singleton, a spokeswoman for Energy Future and Freescale spokesman Robert Hatley declined to comment.

Among high-yield borrowers selling debt this week were GMAC Inc., which sold $1.5 billion of 8 percent, 10-year bonds, and McLean, Virginia-based Alion Science & Technology Corp., which issued $310 million of 12 percent payment-in-kind notes that can pay interest in the form of added debt.

Insurance companies were the best performing industry in the Bank of America Merrill Lynch U.S. High Yield Master II Index with gains of 6.63 percent this month. Bonds of American International Group Inc., once the world’s largest insurer, have risen to the highest levels in 18 months after the New York- based company said March 1 it was selling AIA Group Ltd. to Prudential Plc for $35.5 billion.

Financial service company debt, the second-best performing sector, gained 3.64 percent and restaurant company bonds followed with returns of 3.13 percent, index data show.

In Spain many advisory firms like netvalue consultants do analyse HY investments and related derivatives.
To contact the reporters on this story: Pierre Paulden in New York at; Caroline Salas in New York at

Antonio Rivela


Are Hedge Funds guilty?

Escrito el 30 marzo 2009 por Francisco López Lubián en Corporate, Financial Markets

One of the most striking proposals of the new Obama plan to fix financial system is the regulation of the so-called prívate pools of capital: hedge funds, prívate equity funds and venture capital funds.

According to this plan, which would require Congressional approval, these fund advisers would have to register with the SEC and provide to government confidential information on topics like level of leverage, investors and partners. Most probably, these tougher rules will limit fund´s ability to borrow money to invest in high risk bets.

Before this approach I wonder whether, for this kind of investments, it makes sense to regulate more or rather to enforce what it´s already regulated. Especially on topics related to information and transparency.

At least until now (and in theory), hedge funds were limited to investors who can afford big risks, looking for big rewards… that can become positive or negative. So, what is the explanation to the fact that in the last years traditional investors (like university endowments and pension plans) had become heavy hedge funds investors?

On the other hand, can we say that these funds caused the present crisis? Do we have enough evidence on this? The answer is clearly no. I do believe that the financial mess which led to the current economic crisis was provoked by investments banks acting as hedge funds, or selling to their customer hedge funds solutions as normal investments.  

As Wharton´s Professor M.E. Blume notes: «If the hedge funds lose money, that´s okay. No problem. It´s when the banks lose money that we have a problem»

More than new regulation, I would say that emphasis should be put in to fulfill the present one.  And avoid speculative actions with lack of transparency, like selling short without control. In that sense, the «uptick rule,» which limited short selling, is likely to be proposed early next month by the Securities and Exchange Commission. The rule, which was in effect in the USA from 1938 until 2007, restricted short selling in a declining market. Under the rule, the market needs to have an upward drift to it in order to short.


Ireland & Greece in trouble?

Escrito el 1 marzo 2009 por Antonio Rivela Rodríguez en Financial Markets


Ireland MapGreece Map

Once in a while markets overreact. I believe this is the case with Ireland and Greece. Therefore my crystal ball recommendation would be to buy as much Irish and Greece treasuries as you can.

Both economies are not doing amazingly well but nevertheless are European developed countries. Credit markets are pricing both of them as if they were a high yield corporate bond.

As Bloomberg pointed out last week the cost to hedge against losses on Irish government bonds is now the highest in the Euro region as Moody’s Investors Service changed its outlook on the top-rated debt to negative.

They added that Credit-default swaps on Ireland rose 2 basis points to 262.5, according to CMA Datavision. Investors perceive that the second riskiest nation is Greece, with contracts on its government debt costing 255 basis points, CMA prices show.

“The current economic crisis is likely to significantly affect Ireland’s economic strength and government financial strength for the years to come,” Moody’s analysts Dietmar Hornung and Kristin Lindow wrote in a report last week.

Ireland’s economy is headed for a record 5 percent slump this year as construction and consumer spending shrink, according to government forecasts. The collapse has lifted unemployment to a 15-year high and may push the budget deficit to more than three times the European Union limit.

The cost to hedge against losses on Irish debt is now more than Chile, the Czech Republic, Israel, Malaysia, Saudi Arabia, Thailand and China, CMA prices showed.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company or country fail to adhere to its debt agreements.

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.




¿Hay algún sitio donde invertir?

Escrito el 24 febrero 2009 por Francisco López Lubián en Financial Markets

Esta es la pregunta del millón que normalmente me hacen -en ocasiones, no sin cierta sorna- todas las personas que saben que me dedico a esto de las finanzas.  Como suele ser frecuente, es más fácil dar la respuesta negativa -dónde no invertir-, que la positiva.

¿Dónde invertir? Depende fundamentalmente del plazo. Por ejemplo, la inversión en bolsa. Es evidente que, con visión a largo, la bolsa está barata, lo que no quiere decir que haya tocado suelo. Recordemos que, en el estallido de la burbuja de las «punto com», el Ibex se situó en el entorno de los 5.500. Y, ¿estamos ahora mejor que entonces? Invertir ahora en bolsa con visión a corto no me parece aconsejable.

Una inversión a largo que me parece interesante se orientaría a algunos fondos de Private Equity que se están centrando en buscar rentabilidades basadas en los factores operativos de las empresas donde invierten. En momentos de turbulencia suelen quedar los mejores.

Como a largo plazo, todos muertos, ¿hay alguna recomendación a corto? Sí. Las escasas opciones que proporcionan un acertado equilibrio entre liquidez y rentabilidad. Por ejemplo, depósitos garantizados, bonos corporativos de empresas de alto nivel, algún ETF sobre materias primas.  

Y que Dios reparta suerte.


Informe sobre salida de empresas a bolsa

Escrito el 19 febrero 2009 por Administrador de IE Blogs en Financial Markets


Política monetaria para una crisis

Escrito el 10 diciembre 2008 por Juan Toro en Financial Markets

Las últimas medidas tomadas por la Reserva Federal de Estados Unidos (Fed) en la gestión de la crisis han demostrado la coherencia de su Presidente, Ben Bernanke, entre lo que dice y hace. En 2002 y 2003, cuando todavía no era presidente de la Fed, Bernanke defendió en distintas apariciones públicas las mismas medidas que ahora está aplicando para enfrentarse a la deflación. Bernanke parece tener muchos planes consistentes entre sí, que configuran una visión global sobre cómo evitar que la economía americana roce la deflación, y sobre cómo reaccionar si se produce. No ha lugar a la improvisación.
La expresión más clara de su política es lo que se ha conocido como expansión cuantitativa. Para entender este concepto, es útil recurrir a la clásica ecuación cuantitativa del dinero, que expresa el gasto nominal de la economía como producto de un agregado monetario multiplicado por su velocidad de circulación, que representa el número de veces que tiene que circular el dinero para financiar un determinado gasto nominal. Si la velocidad de circulación se estanca, la única manera de alcanzar un determinado gasto nominal es a través del incremento de la masa monetaria en circulación. Paul Volcker, presidente de la Fed a finales de los años setenta, también recurrió a la relación entre masa monetaria, velocidad de circulación y gasto nominal, pero con un objetivo contrario: reducir la inflación en Estados Unidos. En aquella época, la Fed vigilaba el crecimiento del agregado monetario para controlar el gasto nominal (y así la inflación), permitiendo que el tipo de interés a muy corto plazo fluctuara libremente. Ahora, con un tipo de interés cercano a cero (el tipo de interés en Estados Unidos está al 1%, y se espera que baje al 0.5%), la expansión cuantitativa es la única alternativa para incrementar el crédito.
Esta política se ha instrumentado a través de la expansión de la base monetaria (reservas bancarias en el banco central más dinero en circulación) que se ha producido como consecuencia de los planes de la Fed (créditos para AIG, créditos para la operación de salvamento de Bear Stearns, subastas de liquidez,…). Gracias a que dichos planes no han sido esterilizados a través de operaciones de mercado abierto, se ha producido una expansión de la base monetaria, y han generado un aumento del balance de la Fed, cuyos pasivos se han triplicado en menos de seis meses. Así, la Fed está supliendo la inactividad del sistema bancario, que es incapaz de trasladar la reducción de tipos en un aumento del crédito. La Fed ha actuado en todo aquellos sectores del sistema financiero donde había grietas, garantizando los fondos de dinero, reactivando el mercado de papel comercial, comprando cédulas hipotecarias para forzar una reducción en los tipos de crédito hipotecarios, estimulando el crédito al consumo, etc.
En Noviembre de 2002, Bernanke ya contempló la expansión cuantitativa como respuesta más efectiva a crisis similares a la actual. Lo hizo en su discurso “Deflación: asegurémonos de que no ocurre aquí”, en el que señala que tipos de interés cercanos a cero no son óbice para que los bancos centrales puedan estimular la actividad económica. También apuntaba algunas de las medidas recientemente aplicadas (por ejemplo, la adquisición de activos por parte de la Fed), y otras que posiblemente sean anunciadas pronto (por ejemplo, la intención de mantener tipos bajos a lo largo de toda la estructura temporal de tipos a corto y medio plazo).
Bernanke ahonda en tales medidas en otro discurso de Julio del 2003, “¿Una caída en la inflación no deseada?”. Para conseguir un aplanamiento de la curva de tipos, señala que sería necesario que la Fed se comprometiese a mantener el tipo de interés objetivo a cero, lo que afectaría a las expectativas de tipos a corto y medio plazo, y daría lugar a un abaratamiento de los tipos a distintos vencimientos. Como complemento a esta medida, la Fed podría comprar deuda soberana americana con el objetivo de crear un límite máximo sobre el que fluctuarían los tipos de interés a distintos vencimientos. Muy recientemente, Bernanke ha mencionado esta posibilidad, y la mera mención ya ha producido ya los efectos esperados.
Bernanke aporta otras pistas sobre cómo guiará la política monetaria de Estados Unidos en otro discurso de Mayo de 2003, “Algunas ideas sobre política monetaria en Japón”. De forma explícita, pide una mayor cooperación entre los encargados de la política fiscal y la política monetaria, señalando la necesidad de llevar a cabo un programa fiscal expansivo, financiado con deuda adquirida por la autoridad monetaria.
Estas medidas han guiado y guiarán la política de la Fed en los próximos meses. Otros ya le ha seguido, y el Banco de Inglaterra en su última decisión de tipos anunció que compararía bonos del Tesoro, apostando de forma velada por la expansión cuantitativa. El Banco Central Europeo, destacó tímidamente la necesidad de “tomar en cada momento las medidas necesarias”. La gran incógnita es si el BCE será capaz de superar las dificultades que sin duda surgirán al adaptar su mandato a este nuevo escenario.

Utilizamos cookies propias y de terceros para mejorar nuestros servicios y mostrarle contenido relacionado con sus preferencias mediante el análisis de sus hábitos de navegación. Si continua navegando, consideramos que acepta su uso. Puede cambiar la configuración u obtener más información aquí. Aceptar