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  • May 31, 2018
    Fixed Income
    Deutsche Bank’s bonds defy lender’s malaise
    Filippo Alloatti
    As Deutsche Bank’s stock price languishes amid news of job cuts, senior management turnover and a stormy annual general meeting, the performance of the bank’s debt instruments has been resilient. But investors should keep watch on the lender’s ability to service its additional tier 1 – or CoCo – debt. Deutsche Bank’s latest restructuring plan – its fourth in the last three years – sparked a recent share price sell-off. The announcement, however, to cut its workforce by 7,000 and scale back its US operations in an attempt to reduce costs and restore profitability, provided some much needed clarity about its future direction. Nevertheless, the bank’s share price is currently trading 26% lower than it was at the beginning of the year. Bond prices, however, tell a different story (see figure 1).
  • Italy’s election- obstacles and opportunities for investors
    Silvia Dall’Angelo
    Italian elections are often dismissed as an opera buffa, and this Sunday’s vote is no different. A new electorate system, the political comeback of Silvio Berlusconi and the insurgent Five Star Movement have dominated news flow. But as the eurozone’s third-largest economy prepares to go to the polls, we assess the investment landscape in Italy. Silvia Dall’Angelo, Senior Economist Italy is no stranger to political instability. The country’s political history has been defined by short-lived governments, with 65 administrations taking the helm since World War II, each one lasting for a little more than a year on average. Elections are frequent and post-electoral horse-trading between political parties is common. Between 1945 and 1994, the Christian Democrats took a leading role on the political stage. Thereafter, power swung between the centre-right and centre-left parties. Since December 2016, Italy has been under the caretaker leadership of Paolo Gentiloni, following Matteo Renzi’s resignation as prime minister after his referendum to reform the Senate failed to secure the nation’s approval.
  • March 7, 2017
    Fixed Income
    T3 take-off: a new market for European credit emerges
    Filippo Alloatti
    European banks: Reshuffling capital structures at regulators’ request The spectre of a global systemic banking collapse, made almost real at the peak of the 2008 financial crisis, continues to haunt regulators around the world. For instance, in an attempt to shore up bank balance sheets, regulatory authorities are trying to upgrade the Basel Accords to set higher international standards for capital adequacy. However, progress on version IV of the Basel agreement – currently on the committee to-do list – has been sluggish. Nevertheless, while Basel talks may have been sidelined for now, global authorities are making headway on common standards for so-called resolution capital – also known as total loss-absorbing capital (TLAC). It represents a shift in focus from considering common equity tier 1 (CET1), the purest form of equity, to one that takes a more comprehensive view of an institution’s capital. This change in perspective has driven the UK Financial Stability Board (FSB) to zero in on the so-called too-big-to-fail, globally systemically important banks (G-SIBs) – the large financial conglomerates offering an array of services worldwide – with a set of proposals to further shockproof the banking system.