Comment EM and The Cover

The common eurozone sovereign bond keeps rearing its head as a supposed solution to the monetary union’s problems.

Seasoned credit investors are painfully familiar with shareholder-friendly actions. Leveraged buyouts, debt-financed share buybacks and special dividends can all deliver nasty surprises to bondholders.

Biofuels have swollen thanks to policies to combat climate change — even though often, they do not help the problem and can make it worse. This is a shocking record, born of ignorance, both accidental and wilful.

Many of the assumptions that surrounded older iterations of perpetual bank capital instruments are still there in the new class of additional tier one securities.

Pacific Gas & Electric has gone bankrupt with $52bn of debt, blaming forest fires that seared California during 2018. Vale, with $11bn, has been downgraded to the bottom edge of investment grade after its horrific dam burst last Friday.

Spanish telecoms company Telefonica this week became the latest issuer to sell green bonds. The volume of money dedicated to green bond investments meant that there was huge demand and the deal had participation of nearly 50% from green investors. But if those buyers had that much conviction they wouldn’t have waited for this trade.

The shifting sands of bank regulation make it unlikely that it will ever be worth thinking about additional tier one bonds as perpetual instruments.

Mere mention of the words non-performing and loans together has the power to make markets quake, regardless of whether the details are good, bad or neutral.

Maintaining confidence in the system relies on trust that leaders — those selected for their competence and character to set the course for the rest of us — are well informed, able to communicate with others at their level and take decisions that serve the interests of those they lead.

That US president Donald Trump’s administration should pick a fight with the World Bank — and the bevy of other multilateral development banks the US owns shares in — is no surprise.

Europe’s already enfeebled rules around bank failures would be dealt a crushing blow if the Italian state were allowed to use public money to prolong the life of Banca Carige.

Rising hopes that the UK can escape the nightmare of Brexit are misplaced. A second referendum would carry huge risks, and even if the outcome were Remain, it would leave an unstable Britain with a damaged relationship with the rest of the EU.