NEWSLETTER of January 12, 2024

The following content has been added at finexpert:

Deloitte
2024 INSURANCE OUTLOOK
Escalating frequency and severity of global risks — from climate change to cybercrime — is intensifying focus on the insurance industry’s capacity and readiness to react as society’s “financial safety nets.” Most insurers are realizing that reacting to risks may not be good enough and are undertaking transformation efforts aimed at preventing losses from happening in the first place. This shift to a more customer-centric business model will likely require advanced technology adoption and modification of company culture to help minimize siloed interactions, enhance collaboration among employees, and increase accessibility of customer data—but skill sets may need to be augmented. >more

Skadden
ACTIVIST INVESTING IN EUROPE 2024
Our ninth annual report on shareholder activism, produced by Skadden in collaboration with Activistmonitor, anticipates a possible spike in activity across ‘mature markets’ in Europe, such as the U.K. and France. Corporate executives and activist investors also foresee a possible shift in perspectives on ESG issues, perhaps due to the current economic climate. >more

Deutsche Bank Research
FLAUTE IM KREDITGESCHÄFT UND DER KONJUNKTUR HÄLT IN Q3 2023 AN
Lending to companies and the self-employed slowed further in the third quarter (volume EUR -2.6 bn; +0.8% year-on-year). Almost all sectors, maturities and bank groups were affected. The main causes remained higher interest rates and a low propensity to invest. Deposits shrank for the first time since 2014 (-1.3% yoy). Bond issuance was at its weakest since 2008, while leasing performed very well. The German economy is currently likely to be in a slight recession after GDP fell by 0.1% in Q3 and no improvement is expected by the end of the year. >more

Deutsche Bank Research
DEUTSCHLAND-MONITOR BAUFINANZIERUNG Q1/2024
Germany is in recession. After the 0.3% decline in GDP in 2023, we expect a further decline of 0.2% in 2024. We expect structural factors to keep inflation above 2%, which is why Bund yields and mortgage rates should rise again in the course of 2024. By the end of 2024, we expect 5-10 year mortgage rates to rise again to 3.8%. Housing supply is likely to remain tight for years, if not the entire decade. In Q1 2024, the affordability index should fall due to the fall in interest rates and affordability should therefore increase. >more

COLLATERAL ELIGIBILITY OF CORPORATE DEBT IN THE EUROSYSTEM
Loriana Pelizzon, Max Riedel, Zorka Simon, and Marti G. Subrahmanyam
2023
We study the many implications of the Eurosystem collateral framework for corporate bonds. Using data on the evolving collateral eligibility list, we identify the first inclusion dates of bonds and issuers and use these events to find that the increased supply and demand for pledgeable collateral following eligibility (a) increases activity in the corporate securities lending market, (b) lowers eligible bond yields, and (c) affects bond liquidity. Thus, corporate bond lending relaxes the constraint of limited collateral supply and thereby improves market functioning. >more

CREDIT RISK, DEBT OVERHANG, AND THE LIFE CYCLE OF CALLABLE BONDS
Bo Becker, Murillo Campello, Viktor Thell, and Dong Yan
2022
We show that callable bonds have both higher yields and lower market prices than matched non-callable bonds of the same issuer-time, reflecting the value of call features to issuers and investors. This "value of callability" as well as the inclusion and the exercise of call rights are jointly determined by issuer credit quality. Critically, our agency-based theoretical and empirical analyses show that callability reduces debt overhang in corporate mergers. Our results help explain the value and increasing prevalence of callable bonds in credit markets. >more