Approximately $15 billion in high-grade bonds are expected for issuance this week, including from a major bank. While bond sales may be slowing amid the current volatility, loan activity is expected to increase.
Mutual funds have shifted their activity from buying to selling credit default swaps, quarterly filings show. "The twin behaviors suggest US fund managers, as a group, are becoming less concerned about default risk," according to Risk.net.
Managing credit risk exposure to Evergrande is an ongoing challenge for China's banks due to the lack of a mature credit derivatives market. Problems have plagued China's onshore credit derivatives market, a market first established in 2010.
The gap between shorter- and longer-term Treasury yields narrowed to 85 basis points on Tuesday, and Bank of America analysts point out that flattening around this level historically depresses returns on investment-grade corporate bonds. The flattening discourages investment in longer-term Treasurys and can raise hedging costs for overseas investors, thus lowering their demand, the analysts said.
The so-called greenium -- the higher prices and lower yields that sustainable bonds typically fetch -- has been declining recently, especially for riskier businesses. Regulators' push for new disclosure rules and increased scrutiny by investors are contributing to the trend.
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The Financial Stability Oversight Council has issued a report that says climate change risk in the financial system poses an "emerging threat to the financial stability of the United States" and outlines recommendations for action, including establishment of committees and expansion of reporting requirements. "It's a critical first step forward to the threat of addressing climate change but will by no means be the end of this work," says Treasury Secretary Janet Yellen, who chairs the FSOC.
The Basel Committee for Banking Supervision has called on the EU to introduce the new rules on banks' capital, set out in the Basel III regulations, and abandon its suggestion that it might grant banks a two-year compliance extension. Carolyn Rogers, the committee's secretary-general, said the rules are important and should be implemented "consistently and as soon as possible".
European Central Bank board member Frank Elderson said banks in the eurozone should be legally obliged to meet targets they set to mitigate their exposure to climate change. "Only by introducing mandatory transition plans can banks' lofty intentions for the next 30 years be turned into concrete actions now," Elderson told a conference.
Morgan Stanley says it has saved around 50,000 human work hours and $10 million in legal fees by using so-called robot lawyers to handle the heavy administrative burden of switching contracts away from Libor. Several other banks report successful use of AI in the transition process.
The use of credit bots to automate the pricing and trading of investment-grade bonds has laid the groundwork for the technology to function in less-liquid parts of debt markets. Bank of America has greatly increased the global volume traded using bots in 2021.
Experts take center stage at the Annual Virtual Fall Conference.
Early registration discounts will be honored until October 29, so the IACPM urges you to hurry up and register! The conference will run for three days, ending in the early afternoon Eastern Standard Time. The IACPM is offering participants the opportunity to view missed presentations for 60 days following the conference. There will also be ample networking opportunities, so dress-up as you will be on camera as you meet your colleagues or their avatars on line.
It is remarkable how powerful a force simple curiosity can be.
Susan Hill, writer
The IACPM is an industry association established to further the practice of credit exposure management by providing an active forum for its member institutions to exchange ideas on topics of common interest. Learn more at