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Bloomberg Markets Magazine

Bloomberg Markets Magazine April - May 2020

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United States
Bloomberg Finance LP
Back issues only

in this issue

1 min.
the credit issue

What a difference a pandemic makes. The bull market for stocks and credit ended abruptly in March as investors witnessed the spread of Covid-19 and how it depressed economic activity. Governments and central banks are less coordinated than when they battled the 2008 financial crisis. Adding to the chaos, an oil price war slammed energy company debt. Bets against energy sector bonds have been a focus for Knut Kjaer, who was the first chief executive officer of Norway’s massive oil fund and is now trying to protect the climate. In “From Black Gold… to Brown Bonds” (page 58), Stockholm bureau chief Charles Daly profiles Kjaer and his effort to punish climate-damaging companies by driving up their borrowing costs. In Barbados, Prime Minister Mia Mottley is also trying to prepare for climate change.…

4 min.
private credit: a user’s guide

FINANCE HAS SEEN vast changes in the past decade, nowhere more so than in the realm of private credit. As traditional lenders stepped back from providing capital, and central banks worked to keep the market music going, private firms have pooled money to issue ever-increasing amounts of debt, driving the sector’s total global assets to $812 billion last year. That rise was welcomed by yield-hungry investors eager to cash in on the asset class’s returns, private equity firms looking to finance buyouts, and borrowers who struggled to drum up capital elsewhere. It also fueled anxiety among regulators worried that borrowers, as well as investors ranging from mom and pop outfits to big private equity firms, were taking on more risk than they could handle in a downturn. Here’s a look…

6 min.
do pandemic bonds work?

LONG BEFORE THE NOVEL CORONAVIRUS appeared, Olga Jonas was fretting about the next global health crisis. As a World Bank macroeconomist in 2005, she was in the department that helped coordinate the response to avian flu and saw how ill-equipped the poorest countries were to fight a serious epidemic. When an Ebola outbreak afflicted West Africa in 2014, she hoped it would fuel a global consensus behind building local capacities to intervene early. Instead, she says, she was disappointed that the World Bank opted to issue “pandemic bonds” designed to bring in investors to bear some of the cost of containing future outbreaks. The 2017 sale of $320 million of the bonds offered premiums of 11.5% or 6.9%, depending on the risk investors were willing to bear, with the cost…

9 min.
get ready, a bigger disruption is coming

AS GLOBAL SUPPLY chains break, airlines slash flights, borders rise within nation-states, stock exchanges convulse with fear, and recession looms over economies from China to Germany, Australia to the U.S., we can no longer doubt that we’re living through extraordinary times. What remains in question, however, is our ability to comprehend them while using a vocabulary derived from decades when globalization seemed a fact of nature, like air and wind. The novel coronavirus signals a radical transformation of the kind that occurs once in a century, shattering previous assumptions. The last such churning occurred almost exactly a century ago, and it altered the world so dramatically that a revolution in the arts, sciences, and philosophy, not to mention the discipline of economics, was needed even to make sense of it. The opening years…

1 min.
dairy downturn

ADDING A SPLASH of milk to a morning cup of coffee was once the simplest of routines. Until soy, almond, oat, and an array of other plant-based milks started competing for the cups of environmentally and health-conscious consumers. Dairy companies feel the pain. Two of America’s biggest, Dean Foods Co. and Borden Dairy Co., went bankrupt in late 2019 and early 2020. In its bankruptcy petition, Borden disclosed that its annual interest cost was about $21 million, and that was on top of quarterly debt payments totaling $2.35 million. Dean listed debts of more than $1 billion. While consumption of cheese and yogurt continues to grow, demand for milk fell more than 25% from 2000 to 2018, according to U.S. Department of Agriculture data. Dairy companies have also lost sales to retailers…

9 min.
jpmorgan’s aronov expects ‘incredible opportunity’

OKSANA ARONOV KNOWS how it feels to lose everything. In 1991 her family moved to the U.S. after the Soviet Union fell. They were allowed to take only $360, so they left behind the wealth and property her parents had accumulated over their combined 50 years of work. That experience informs Aronov’s view of what’s at the heart of credit portfolio management: risk. Now a 21-year veteran of financial markets, Aronov leads market strategy for the $16 billion absolute return fixed-income platform at J.P. Morgan Asset Management in New York. Fascinated by the mathematical bounds of bond markets, she says fixed-income investors need to learn the value of cash in this latest crisis. She spoke to Bloomberg Markets about the opportunities and hazards she sees ahead. JAMES CROMBIE: In the eye…