In 1970s, when your correspondent was a younger but experienced investment banker, there was a memorable investor note sent out by a bond salesman and former colleague in London called Stanley Ross (on the right in the above photo).
He was working for Kidder Peabody Inc. and was responsible for writing “The Week in Eurobonds” newsletters. When Standard & Poor’s gave Finland a AAA credit rating in 1972, Ross asked “how many Kalashnikovs are pointed their way across the border, and how long it would take a Foxbat to get to Helsinki,” referring to Russian rifles and fighter planes.
The then Finance Minister and Finnish bankers were furious because we had kept our borders safe and had normal trading relationships with Russia by remaining “neutral”. Even though there is a long border, we knew and so did the Russians, that Finland was too close to the West to be touched.
50 years later, after 3 months of a disastrous and brutal invasion of Ukraine by Russia, we can still see that this is still clearly the case. The impact on the high credit standing of Finland and the other Nordics is minimal and our situation is similar to the rest of Europe.
Interest rates have moved higher in the 10-year government bond markets, as inflation soars and central banks tighten liquidity. The European central banks have started to slow down their government bond purchasing programs, while demand for issuing fixed rate bonds increases when rates move higher. This can be seen from the activities of the Nordic Investment Bank, which is much more active than one year ago. They make fixed rate loans available for smaller Nordic borrowers who have weaker access to the bond markets and have seen lending soar more some five times so far this year according to their latest press reports.
The spread of the 10 year Finnish government bond has remained remarkably stable against the German 10 year bond – see the chart below from the Bank of Finland.
Strong democratic countries develop and flower, but bankers and companies come and go – that is life…
Stanley Ross, that colourful banker, sadly died in 2014, at the age of 83 years, and Kidder, Peabody & Co. that American securities firm, established in Massachusetts in 1865 was sold to General Electric in 1986.
In 1994, following heavy trading losses of $350 million because of fraud, it was sold to PaineWebber. The name Kidder Peabody was dropped, ending the its 130-year presence on All Street. Most of what was once Kidder Peabody is now part of UBS AG, which acquired PaineWebber in November 2000.
Photo by Valerie Thompson from “Forever Missed”