So, it’s happening. The Banking Reform bill to be published today will give the Treasury and the bank regulator the power to break up a bank that doesn’t respect the ringfence between retail banking and the riskier stuff. Read more
The concept of Ivan Glasenberg on a charm offensive is hard to grasp. Charm is not generally considered one of the key characteristics needed to be a top trader, but he’s going to need all that he can find to push through the shotgun merger of Glencore, the business he built, with Xstrata. There’s an awful lot riding on this $90bn deal, not least the estimated $100m payday for those poor, starving investment bankers who are desperately trying to get it done.
Alas for Ivan, the omens look poor, thanks to an extraordinary blunder designed to save a relatively trivial amount of tax. The preferred route, a scheme of arrangement, escapes the stamp duty that would be payable in a conventional takeover. In a scheme, approval by 75% of shareholders who vote clinches the deal, but Glencore itself cannot vote its 34% shareholding in Xstrata. It needs a maximum of 16.5% of the shares to be voted against for the deal to fail. In practice, something like 12% against would probably scupper it, since not every share will be voted. Read more
At first sight, this looks mad. Lending to the UK government, in charge of the clapped-out British economy, now returns less than lending to Europe’s most successful country. Worse still, the yields on gilts are measured in sterling, a chronically weak currency, so not only does your money earn less, you’ll be repaid in something which history says will have been devalued by the time you get it back. Oh, and by the way, inflation is 3 per cent above the yield, making the internal devaluation painful, too.
Something is seriously awry here, and two events this week offer clues to why German government 10-year paper yields more than the equivalent UK stock. On Wednesday the markets were spooked by the failure of an auction of 10-year German debt. Those in this arcane world struggled to understand what it meant, so there’s little hope for the rest of us. It’s either bad news, or very bad news, probably depending on whether you’re short of German bonds. Read more