As the U.S. yield curve flattened to just 45 bps (2s-10s) last week, we dug out something I wrote back in 2007, in the early days of this blog. A chart that accompanied the blog showed that a) U.S. BBB credit spreads had hit their tightest level for nearly 3 decades and b) that the yield curve had flattened substantially (and in fact inverted). If you pushed the yield curve shape chart 18 mon…
Read the articleIt is fair to say that markets have become more lively of late. One sector in particular has been the epicentre of revived market volatility – Technology.
In the US high yield market, the US tech sector has weakened relative to the broader US high yield market. Given higher leveraged balance sheets, high yield bonds tend to be more sensitive to sector specific headwinds.
The chart below shows t…
Read the articleOn this week’s BVTV I am joined in the studio by fund manager Dr Wolfgang Bauer and we will be focusing on the recent escalation in geopolitical tensions after the US imposed further tough sanctions against Russia. What does all this mean for bond investors and should we be now thinking about de-risking our portfolios? As ever, the picture is more nuanced than it would first appear. While Russi…
Watch the videoThe current Conservative Government has pledged to meet its 2015 manifesto commitment to deliver one million homes by the end of 2020 and to “deliver half a million more by the end of 2022“. For this to be met, completions would need to rise to levels not seen since the late 1970s.
Unfortunately for the UK Government, increasing the housing supply has long been a difficult challenge. There has…
Read the articleBouts of market volatility have characterised the year so far as investors try to correctly price in news coming from the US. Is investor reaction truly reflecting the fundamental picture? Christophe Machu, investment specialist in the Multi Asset team, takes a look.
Watch the videoThis week on BVTV, I have a look at past US interest rate cycles. With new Fed Chair Jerome Powell now in the hot seat, bond investors are keen to understand whether he will be more hawkish than his predecessor, Janet Yellen. Turning to the UK, the market is now pricing in a high probability that the Monetary Policy Committee hikes interest rates in May, but the flattening of the gilt curve may…
Watch the videoToys “R” Us announced last week that it has so far failed to find a buyer or reach a debt restructuring deal, raising the prospect of widespread store closures and job losses. While a rescue package could yet emerge, the future is looking far from rosy for the toy store. M&G fund manager and deputy head of retail fixed interest Stefan Isaacs joined me this morning to discuss prospects for the f…
Watch the videoCreating a Eurozone-wide safe asset and thus diversifying sovereign risk within the currency union without the need for sovereign debt mutualisation – sounds like having your cake and eating it, doesn’t it? Well, according to the European Systemic Risk Board (ESRB), sovereign bond-backed securities (SBBS) might do the trick. SBBS are merely an idea, discussed in ESRB working papers, feasibility…
Read the articlePresident Trump has sent shockwaves through the global business community with his decision to impose tariffs on steel and aluminium imports to the US. Will this protectionist move prove to be the catalyst for an eventual downturn in global economic growth, and what are the implications for equity and bond markets? Randeep Somel, deputy fund manager in M&G’s equities team, joined me this mornin…
Watch the videoIn this week’s episode, fund manager Charles de Quinsonas joined me to discuss what the recent bout of market volatility meant for the emerging markets. Were all parts of the EM bond universe equally affected, and where do we see most value today?
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