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Cheerio credit, not good bye

We started 2019 with credit at levels we perceived to be pretty cheap. The run since then has been remarkable, with spreads today close to all-time lows. What should one be doing with credit risk at this point?

There are reasons to remain bullish on credit, and fully invested. First, we remain in a goldilocks economic environment for bonds, with low growth and low inflation. These economic …

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Craics begin to show in Ireland’s political establishment

With European media outlets focusing on the coronavirus and storm Ciara this week, only little attention was given to the Irish general election held on Saturday. Undeservedly so, I’d argue, considering that the election results mark a seismic shift in Irish politics. The surge of Sinn Féin, winning 24.5% of the first-preference vote, de facto ended the two-party dominance of Fine Gael (20.9%)…

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Has Europe really turned the corner?

Lately a growing number of indicators have suggested that the European economy might be out of the woods, heading towards a more robust recovery. For instance, while European inflation remains significantly below the ECB’s inflation target of close to but below 2%, it is worth highlighting that the year-on-year headline rate has in fact doubled from 0.7% in October 2019 to 1.4% in January 2020….

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Can Africa’s wall of eurobond repayments be dismantled?

There has been a wave of African eurobond issuance over the past decade. South Africa started the eurobond  trend for the continent in 1995, but it has only been since the global financial crisis that push and pull factors have encouraged broader African issuance.

The asset class has grown to 21 African countries with outstanding sovereign eurobonds, totalling $115 billion. This follows a …

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Some quick thoughts on Italy after yesterday’s regional elections

Italy currently has a “yellow-red” government

Conte is the Prime Minister supported by 5 Star Movement (yellow) and the left party (red). Prior to this government there was a “yellow-blue” government led by Conte and supported by 5 Star movement (yellow) and the right party with Salvini (blue).

Over the last couple of years there have been 2 significant changes

  1. The right-wing parties…

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European Central Bank has one item left in its toolkit: dual rates

A version of this article originally appeared in the Financial Times last week.

There is a widespread assumption that the European Central Bank — like other major central banks — has reached the limits of monetary policy, and that the best we can hope for with Christine Lagarde’s reign is political astuteness in cajoling reluctant politicians to embrace a fiscal stimulus.

This is n…

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EM Debt: 2019 review and 2020 outlook

2019 proved to be a spectacular year for returns in most asset classes and emerging market debt was no exception. Returns were driven by a combination of cheaper valuations to begin with and also helped by the market-wide U-turn in going from pricing in Fed hikes to cuts and by the subsequent US rate rally. Some key risks were also priced out as the year moved on, including the US-China trade …

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The 2020 geopolitical risks that matter for emerging markets

Last year was very eventful in emerging markets with its share of US tariffs/sanctions, regime changes in many countries, mass protests across the board and Carlos Ghosn escaping Japan to soon-to-default Lebanon on the very last day of the year! 2020 promises many geopolitical risks. We have compiled some of the key risks below for developing economies, including “the biggest crisis no one is…

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Elizabeth Warren has a plan: US investors pay attention

Senator Elizabeth Warren of Massachusetts has big plans. She dislikes the path the United States is on and wants to make fundamental changes to the economy. These plans include much tougher regulation of banks, a breakup of large ‘monopolies’ — her first sight is on technology companies — and also a healthcare system based on a single payer principle. Just under a year from the US President…

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The fall of the Berlin Wall – a lesson for history or markets?

Earlier this month, Germany celebrated the 30th anniversary of the fall of the Berlin Wall, a pivotal moment in recent history that left the Soviet-led communist bloc on the brink of collapse. Whether the Hoff was single-handedly responsible or not, the reunification of communist East Germany with capitalist West Germany was a unique economic shock with a number of potential lessons. Changing…

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