Above the Fold

European Bond Action Signals Tighter Monetary Policy

Banks across Europe are issuing covered bonds at a record rate. This type of debt, typically sold by lenders (banks), is popular across the pond. The security is issued to provide on-balance sheet funding of assets. Because these bonds are backed by both the issuer’s credit, and a “cover pool” of high-quality assets, they tend to receive a higher credit rating and thus more favorable interest rates. 

Covered bond sales recently jumped to the highest monthly level since the coronavirus pandemic began, with sales totaling $23.5 billion in September and $13.6 billion in October. The rise in these types of securities is an indicator that banks are working to get ahead of looming interest rate hikes by locking in low rates now. Aside from covered bonds, financial companies have raised more debt in the current quarter already than in any Q4 over the last 15 years. Above-trend inflation in the Euro bloc is likely to force the hand of the European Central Bank (ECB) to raise rates, reduce liquidity, or both, in 2022. 

Three Things 

1. What’s Going on at Amazon? – Next to its mega ecommerce business, Amazon’s most critical business is its cloud-computing unit, Amazon Web Services. Unfortunately for the mighty tech giant, the critical division, which powers thousands of businesses globally, went down for the third time in a month. And while outages happen, Amazon’s deep reach, along with the fact that many entities are entirely cloud-based, means that an outage at Amazon can shutter commerce across a myriad of sectors. 
2. There’s a Problem With Candy Canes – The latest casualty of global-pandemic-related supply chain woes shows that nothing is off limits. America is facing a candy cane shortage, just as the holiday season is reaching its crescendo. One major supplier, Hammond’s Candies, is turning down more than 30% of its orders as it struggles with limited supplies, higher prices and a staff that’s just 40% of what it was before COVID-19 hit. Other companies, like Kraft Heinz, are even offering consumers cold, hard cash to select alternative desserts in order to balance demand for delectables. 
3. America Will Soon Run on Batteries – According to S&P Global Market Intelligence, the U.S. electrical grid is set to add six gigawatts of battery storage in 2021 and another nine gigawatts next year. That’s a massive increase considering the entire grid only had less than one gigawatt, enough to power about 350,000 homes for a few hours, in 2020. Government mandates and falling hardware costs are fueling the increase, along with an increasing need for stable power during emergencies and outages. 

Did You Know? 

Van Gogh’s Notorious Ear Incident 

Vincent Willem van Gogh lived a tough life. Born in the Netherlands in 1853, the now-famous artist struggled with poverty and personality disorders, including severe nervousness, depression and dementia later in life. It was on this day in 1888 that Van Gogh threatened his friend with a knife before turning the blade on himself, mutilating his ear lobe. After the incident, he was first hospitalized and then checked himself into a mental institution in Saint-Remy for a year — where he created some of his most popular works. Van Gogh struggled financially for much of his life and only ever sold one painting before he took his own life at 37.