Euro-Area Governments Should Heed S&P’s Warnings

Market reaction to S&P’s decision to downgrade several euro-area countries last week has been rather muted, probably because the move was not really a surprise. Still, I think euro-area governments should pay close attention to the rating agency’s reasoning.

read more

Do “Risk-Free Assets” Still Exist?

The current sovereign-debt crisis in Europe is raising long-term questions about some of the bedrocks of finance and investment theory. Namely, are the concepts of a “risk-free rate” and “risk-free assets” still meaningful when the creditworthiness of so many developed countries is under threat?

read more

Europe’s Fiscal Compact: A Very Modest Step Forward

The fiscal compact that the leaders of most European Union countries agreed on last week to bring some order to the euro area was broadly in line with expectations. While it may eventually be seen as a first step towards true fiscal union, it is more like a pistol than the long-awaited big bazooka.

read more

More on Dim Sum Bonds

A reader of my recent article on dim sum bonds, which was reposted on Seeking Alpha, expressed confusion about what action we recommend. While we are not, per se, making recommendations, here’s a clarification of what I meant.

read more

Is the Euro Zone at the Beginning of the End of Muddling Through?

This week’s series of high-level meetings in Europe is being billed as make or break for the euro. The good news is that European politicians finally seem to realize the extreme seriousness of the current situation. But any agreement at this Friday’s summit of all 27 euro-area countries is likely to stop short of anything [...]

read more

Where’s the Euro’s Lender of Last Resort?

Spain was back in the spotlight today, as rising bond yields suggested that investors remain unimpressed by the victory of the Popular Party in Sunday’s election. But the stress is spreading well beyond the euro area’s so-called periphery.

read more

Excessive Leverage: The Root of All Financial Crises

Today’s European sovereign-debt crisis has much in common with other seemingly unrelated crises of the past decade. The common element? Too much leverage.

read more

New Governments in Greece and Italy Could Contain Damage

As political casualties of the European sovereign-debt crisis mounted this week, it’s easy to understand why financial markets panicked. But all hope is not yet lost.

read more

Recent Bad Economic News Doesn’t Spell Muni Bond Defaults

While renewed concerns about economic growth cloud the outlook for US state and local tax collections, we don’t envision a rash of municipal bond defaults if tax collections are lower than expected. Here’s a recent report from my colleague Guy Davidson.

read more

Do Sovereign Downgrades Matter?

Speculation continues to build that another major credit rating agency will downgrade the US this year. What impact, if any, would further sovereign downgrades have on the capital markets?

read more

Archives by Month:

Archives by Subject: