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China Evergrande Group in Beijing

Credit markets will withstand Evergrande shocks

Is China Evergrande another Lehman Brothers moment? Not at all, according to the $40 trillion global corporate debt market. International credit investors have good reasons to be so nonchalant about the potential ripple effects of problems at the Chinese property behemoth with a $300 billion debt pile. Granted, Evergrande’s slow-motion crash has had some impact. As the group’s 2025 dollar bonds have collapsed to trade at a mere 30% of face value, the riskier end of China’s debt market has suffered. The average yield on dollar bonds issued by junk-rated Chinese companies has doubled to around 16% since the start of the year, according to an ICE Bank of America index. And safe-haven U.S. bonds rallied on Monday when global stock markets wobbled. But those ripple effects look contained. In the United States, where some $19 billion of Evergrande bonds are issued, the average extra yield that investors demand to own junk-rated debt is steady at roughly 310 basis points, another ICE Bank of America index shows. That’s even lower than the levels seen in the heady days of September 2006. And the yield spread on bonds issued by U.S. and European investment-grade companies are below levels seen in late 2007, the year before the collapse of Lehman Brothers. This makes sense. Western government bond yields are still low and below market expectations of future inflation. Investors need to take risks if they don't want to see price rises erode their returns. New Covid-19 variants or a Chinese property meltdown could hurt the global economic recovery. But companies have emerged from the pandemic in good health having raised cash, cut costs and skimped on investment in the past 18 months. European companies’ debt has fallen to 2.3 times trailing EBITDA and that multiple could sink as low as 2 times by year-end, its lowest since before the Lehman collapse in 2008, Citi analysts reckon. Meanwhile, Moody’s is forecasting a global corporate default rate of just 1.7% year-end, less than half the historic average. Resilience could prove to be an Achilles heel. Persistent demand for corporate debt will keep borrowing costs low, which may tempt more companies to gear up to finance shareholder payouts. That, however, will be a problem for another year.

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Italy will be first to light up Europe’s weed biz

Italy may soon jump on the weed bandwagon. A nationwide referendum to legalise cannabis will likely take place early next year. If Italian voters embrace dope, it will spark a domino effect across Europe.    

UPDATE 1-U.S. Senate to vote soon on Chopra's move to top consumer watchdog

U.S. Senate Majority Leader Chuck Schumer on Tuesday advanced a full chamber vote on the nomination of Federal Trade Commission member Rohit Chopra to lead the Consumer Financial Protection Bureau, a key agency for President Joe Biden's administration. The Senate Banking Committee tied 12-12 on Chopra's nomination to the CFPB in March, but Schumer on Tuesday "discharged" Chopra from the committee, meaning his nomination can be put to a full floor vote.

The logo of Unilever is seen at the headquarters in Rotterdam

Florida pension leader says on track to restrict Unilever

Florida's top pension investment officer said on Tuesday he expects the state will restrict purchases of Unilever PLC assets starting in late October after the company's Ben & Jerry's brand halted sales in the Israeli-occupied West Bank.

People are seen outside the New York Stock Exchange in New York City, March...

U.S. Bancorp’s $8 billion deal is the mostly good kind

Politicians who mistrust Wall Street’s motives warn darkly of the rise of mega-banks. They will no doubt give U.S. Bancorp a hard time for its $8 billion acquisition of MUFG Union Bank, announced on Tuesday. On balance, though, this merger of two lenders is the good kind.

U.S. Senate may vote soon on Chopra's move to CFPB

U.S. Senate Majority Leader Chuck Schumer told lawmakers on Tuesday that he will begin the process of bringing Rohit Chopra's nomination to lead the Consumer Financial Protection Bureau to the floor for a vote.

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Biden to nominate big-bank critic Omarova to head OCC -White House

U.S. President Joe Biden plans to nominate Cornell University law professor Saule Omarova, who has criticized cryptocurrencies and advocated for the government to have a much bigger role in banking, to run the Office of the Comptroller of the Currency, the White House said on Thursday.