Bonds & Interest Rates
(March 19): Denmark’s central bank will switch from operating one negative interest rate to three by the end of this week, joining several other peers that have overhauled frameworks in a bid to fine-tune their policy levers.
The Copenhagen-based Nationalbank, whose subzero monetary stance since 2012 is the longest-lasting such experiment, is bringing into effect changes to its regime that it announced to investors last Thursday. Its overnight deposit rate and its key deposit rate will now both be at -0.5%, while its lending rate will be at -0.35%.
The measures are designed to help fulfil the central bank’s mandate of protecting the krone’s peg to the euro, responding to fluctuations in money-market rates that flowed from the wide spread in its rates. The revamp is just one of many tweaks by counterparts in recent years aimed at enhancing control of monetary policy using multiple levers.
In Denmark, the spread between the central bank’s key lending and deposits rates has been gaping for more than half a decade, leading to market vacillations that hindered the defense of the peg, according to Daniel Brodsgaard, a fixed income analyst at Danske Bank A/S. The changes are a shift in approach that more broadly applies subzero policy.

Meet Lex Greensill.
He founded Greensill Capital to disrupt supply-chain finance, an industry that supports $7T in global trade activity.
As reported by the Wall Street Journal, Greensill — with a big investment from SoftBank — was potentially headed for a $40B IPO last year. Instead, it just declared bankruptcy, sending shock waves through global finance.
First, what is supply-chain finance (SCF)?
Imagine you are a manufacturer that sells widgets to a car company (CarCo). Typically, you will give CarCo 90-120 days to pay off its goods invoice.
Waiting for money sucks, though.
Enter a supply-chain financier, usually big banks. Let’s say the invoice is $1k. The financier offers to buy it from you for $990 upfront and — when CarCo pays the bill later on — it profits $10.
This type of financing is low margin and reserved for big business
The JPMorgans of the world will do it as a way to upsell other services.
From a young age, Lex Greensill was obsessed with making SCF more accessible. He grew up on his family’s Australian melon farm and saw how long (sometimes 1yr+) it took his parents to turn crops into money.
After doing SCF lending at Morgan Stanley, he launched Greensill Capital in 2011 to create a platform that would make such financing available to more people.
To break into the industry, he cut corners…
… by giving lax lending terms and providing money to nontraditional clients (skyscraper builders, plane leasing companies).
His most controversial deals included:
- Opaque loans to UK steel magnate Sanjeev Gupta
- Self-dealing with other SoftBank portfolio companies
Greensill’s portfolio was filled with time bombs
It all imploded on March 1, when a required insurance policy lapsed and the insurer refused to renew it. A week later, Greensill declared the business insolvent.
Here are some of those taking the biggest Ls:
- German citizens: 26 towns across Germany linked to a Greensill-owned bank may lose $300m+ in deposits.
- SoftBank: After a scorching hot run of investments (Coupang, DoorDash), Masayoshi Son has another WeWork on his hands and will write down its $2B investment.
- Citi: The global bank has assets in a $10B supply-chain fund related to Greensill frozen.
Regulators, investors, and borrowers are only now starting to dig through the mess (a coal company owned by West Virginia’s governor just sued).
Keep an eye on this space… there’s sure to be more news to come.

(Bloomberg) — In the never-ending give and take between hedge funds and their investors, some managers are simply taking too much. Says who? Surprisingly, a hedge fund manager — one of the biggest, in fact.
“It’s really important that most of the alpha goes to the clients,” Luke Ellis, who oversees about $124 billion as chief executive officer of Man Group Plc, said in a Bloomberg “Front Row” interview. “The client is the one taking all the risk, and the client should get the majority of the rewards.”
His issue isn’t with the typical hedge fund. Indeed, Man has funds that still charge the classic “two and 20” — 2% of assets and 20% of investment profits in a given year. It also has products that cost a lot less, which explains why the company’s average fee in 2020 was 0.75%, or 75 cents on every $100 under management.
What irks Ellis are the expensive funds, many of them run by billionaires, that don’t target high enough volatility or, worse, lose money for clients. He won’t name them, of course, but some of the firms with funds meeting that description have included Bridgewater Associates, York Capital Management and BlackRock Inc.
The question isn’t whether a hedge fund should get paid to outperform, it’s how much. Ellis said that clients should keep two-thirds to three-quarters of every dollar of excess return, or alpha. Using his yardstick, a $10 billion fund with a two-and-20 fee structure would have to make a gross return of about $1.5 billion, or 15%, for the economics to be fair to all parties. Last year, the average hedge fund returned 9.5%.

Morgan Stanley becomes the first big U.S. bank to offer its wealthy clients access to bitcoin funds
- The investment bank told its financial advisors Wednesday in an internal memo that it is launching access to three funds that enable ownership of bitcoin, according to people with direct knowledge of the matter.
- Two of the funds on offer are from Galaxy Digital, a crypto firm founded by Mike Novogratz, while the third is a joint effort from asset manager FS Investments and bitcoin company NYDIG.
- Morgan Stanley is only allowing its wealthier clients access to the volatile asset: The bank considers it suitable for people with “an aggressive risk tolerance” who have at least $2 million in assets held by the firm. Investment firms need at least $5 million at the bank to qualify for the new stakes.

THE CORONAVIRUS PANDEMIC has offered a poignant reminder, as if we needed one, that the United States is a profoundly unequal country. Over the past year, the The Washington Post recently reported, nine tech billionaires saw their net worth increase by a total of $360 billion. Eight of the nine men made their fortunes at companies based in the San Francisco Bay Area or Seattle, where most of them still live. (The biggest winner, Elon Musk, recently decided to ditch California for Austin, the tech boomtown of Texas.) Their runaway wealth reflects not just the divide between the top earners and everyone else but the geographic clustering of prosperity in America.
Things used to be different. From 1930 to 1980, per capita income in most metro areas converged toward the national average. The richest cities in the country included places like Cleveland and Milwaukee. In the 1980s, though, that pattern reversed. As both political parties embraced a hands-off approach to antitrust enforcement and competition policy, the national economy grew increasingly concentrated in fewer and fewer corporate hands, based in fewer and fewer places. This—along with other factors, including restrictive land-use policies and the decline of American manufacturing—helped get us to where we are now: a country in which housing prices spiral out of control in superstar cities like Seattle and New York, while vacant buildings crumble in places like St. Louis and Detroit. Meanwhile, the political and cultural divisions between regions grow ever wider.
In Fulfillment: Winning and Losing in One-Click America, Alec MacGillis, a senior reporter for ProPublica, describes the on-the-ground consequences of this regional divergence, focusing on perhaps the biggest overall winner of the winner-take-all economy: Amazon. The company’s economic clout has only increased since MacGillis began his reporting. Since the pandemic began, its value has grown by more than 50 percent—leading, MacGillis notes, to a hiring spree that has put Amazon on pace to become the country’s largest employer by next year. In Baltimore, where MacGillis lives, it is already a dominant presence, with massive fulfillment centers at what used to be the site of the Bethlehem Steel works at Sparrows Point. In Fulfillment, MacGillis explores how the company has become both a symbol and a driver of regional inequality through its treatment of workers, its impact on small businesses, and its ability to influence the political process. We spoke earlier this week. (This interview has been condensed and edited for clarity.)
