J. L. M. Campuzano (Spanish Banking Association) | Debt is essential for growth. And in fact, the Big Recession, which was sparked by the US subprime crisis, lies in the high level of debt generated during the previous decade known as the Great Moderation. So just as periods of expansion are favourable for building up debt, this has to be adjusted during periods of recession (and depression).
AXA IM | Companies have re-leveraged their balance sheets since the global financial crisis (GFC), driven by low borrowing costs. Although heightened, corporate leverage is not currently excessive in developed markets, although we see signs of concern in emerging markets. In this note we assess whether we should be concerned about corporate leverage at current levels.
Caixin | Financial markets have been jolted by a number of defaults on corporate debt in recent weeks, with state-owned Dongbei Special Steel Group Co. missing a 700 million yuan repayment on May 5.
The demise of Abengoa, the Spanish engineering and renewable energy firm, would have been a massive blow for its creditor banks. So the government and the banks have been working on a solution since the company entered pre-insolvency proceedings. The deal agreed this week hands over the majority of Abengoa’s capital to its creditors.
MADRID | The Corner | Although the eurozone economy in August has become the main focus of investors’ concern, peripheral debt continues to attract them. Yesterday, for the first time in history, the Spanish Treasury 3-months bills traded at negative rates on the secondary market. To date, the Treasury has covered 70% of the expected gross issuance in 2014 of 242,370 million euros, which means a decrease in the average cost of outstanding debt of 14 basis points since December 2013 to stand at 3.59% . However, the Treasury decided yesterday to cancel the auction of bonds and notes scheduled owing to the absence of investors because of the summer season.
MADRID | Alex García
ATHENS | Via Macropolis | Unpaid private debt in Greece is estimated to have reached around 160 billion euros, which corresponds to 88 percent of GDP, but was largely ignored until the last few days, when it became a key issue in the discussion between the government and the troika. Apart from the outstanding amount, the dynamic, which clearly shows a steady upward trend, is also a worrying factor.
MADRID | By The Corner | The number of trade assets obtained on deferred terms and returned unpaid by households and companies plummeted by 25.2% in May, according to Spain’s National Statistics Institute (INE). Thus, defaulting in commerce puts together 25 months of year-on-year drops.
MADRID | The Corner | While markets are expressing their concerns about the French economy, institutional investors seem quite comfortable about the Hexagone’s situation: the debt share of non-residents is 57.3 %, according to Eurostat. Finland and Latvia are the top choices with 81.6 % and 80.0 % of their debt owned by non-residents. Check the graph above.
MADRID | By Luis Arroyo | What good does it do a falling debt if nominal GDP is increasing? According to the Real World Economy in Greece, the households’ debt went as shown in the chart. That is, the nominal value of the existing debt has dropped, but it has increased in relation to the income or the GDP with which it is paid. And this, ladies and gentlemen, is the best expression of the Debt Deflation concept.