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Looking for value in UK RMBS: the three questions I ask myself before investing

Following a quiet 2020, the UK residential mortgage backed securities (RMBS) primary market sprung to life in the first month of 2021. This brings some focus to an area of the bond market that I think looks cheap – not something you hear said about bonds every day. We even saw the first ESG UK RMBS issued (Gemgarto) just last week.

The exceptionally low interest rates offered by the Bank of…

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Green bonds, blue bonds, ESG bonds galore – a beginner’s guide for fixed income investors

An abridged version of this article first appeared in Investment Week (print edition, 1 February 2021, p. 14)

The past five years have seen an exponential increase in investors’ ESG awareness, and corporate issuers are increasingly finding new ways to take advantage of the demand for sustainable investments. In the world of fixed income, one concept which has gathered plenty of attention ha…

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Sustainability-linked bonds: should you wish for the worst?

This month has been an active one for new issuance in emerging markets, including a huge increase in ESG-labelled bond issuance. Sustainable, social and green bonds are being marketed actively by issuers and currently meet robust demand on the back of both inflows to emerging markets (EM) and the continuous development of ESG strategies.

Less common, sustainability-linked bonds (“SLBs”…

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Are rating agencies overlooking the impact of COVID-19 on Eastern Europe and Central Asia?

Rating agencies’ drawbacks come to light again

In times of crisis, markets understandably pay particular attention to the actions of credit rating agencies. For example, during the global financial crisis of 2008-09, the rating agencies were widely accused of failing to identify the widespread vulnerabilities in the financial system, reacting with “behind-the-curve” blanket downgrades. The …

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Emerging markets outlook: seven themes for 2021

Markets ended 2020 in a buoyant mood, with emerging market spreads tightening in the final quarter as the US election result and positive vaccine news provided a boost to investor sentiment. While nobody has been blind to the global recession, focus has shifted to expectations of an economic recovery.

Most people were happy to see the back of 2020. It was an eventful and challenging ye…

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The Fed’s Dots: Treasuries still dear, but no longer massively mispriced

Here’s an update of my favourite long term measure of bond market valuations.  I’ve been updating this chart on the blog over the years, and if you’d bought and sold US Treasury bonds when they diverged significantly from the range implied by the Fed’s long term rate expectations, you would have done OK.

So what does my favourite chart show?  I’ve shown the 10 year US Treasury bond yie…

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Testing the zero bound: the strange effects of a strange recession, in 2020 and beyond

This year has seen the sharpest and largest economic downturn the modern global economy has ever seen. However, as I have commented several times this year, this recession is a rather strange one: for once, this time really is different (see chart below).

This recession has not been caused by any of the usual suspects: namely tight financial conditions, a real or market bubble bursting…

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ESG integration – what about sovereigns?

In an increasingly sustainability-conscious world, many investors are turning to environmental, social and governance (ESG) driven funds. As well as offering a useful framework to analyse financially-material risks, for investors who object to coal-mining and oil-refining, or to alcohol and gambling, it makes sense not to finance companies which engage in these activities through their investm…

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COVID-19 and the Chinese renminbi: room for further strength, but near-term upside may be limited

While many emerging market currencies have posted lackluster returns this year, the Chinese renminbi has been a clear outperformer, having appreciated by 5.9% against the US dollar in 2020.

There are a few important drivers that explain the currency’s appreciation this year. First of all, China has handled the COVID-19 virus better than most other countries and, as a result, has suffere…

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