Category Archives:

credit

Mini Bonds – who is buying them?

One of the many unintended consequences of structurally low interest rates over the past few years has been the emergence of mini-bonds in the UK. These are typically non-tradable debt instruments issued by companies directly to individual investors*. We’ve commented before on one such bond issued by Chilango, a London based vendor of Mexican food, and highlighted some of the risks relative to …

Read the article

“A grip on the public finances”. Redeeming war loans as UK borrowing rises.

As you know, we’ve always been fascinated by the UK’s War Loans and have written about them repeatedly on this blog (here’s what we wrote in 2011 when we suggested that they should be redeemed). Bonds and war go together hand in hand, and for most of history rising government debt levels have been directly caused by the cost of financing conflicts, or the reparations afterwards. The several out…

Read the article

Drifting apart: The decoupling of USD and EUR credit spreads

The decoupling of European and U.S. yields has been one of the key bond market themes in 2014 and therefore a much-discussed topic in our blog and elsewhere. Over the past two and a half months, however, a second type of transatlantic decoupling has emerged, this time with regards to credit spreads.

Let’s first have a look at the relative year-to-date (YTD) performance of USD and EUR investment…

Read the article

A tool for a rising rate environment: high yield floating rate notes

We are entering a new era for interest rates in the developed world. The extended period of ever looser monetary policy is starting to draw to a close. In the wake of the tapering of quantitative easing (QE) from the Federal Reserve (Fed), investors now expect to see the first interest rate hikes in many years, initially in the UK and shortly afterwards in the US. The principal focus of the deb…

Read the article

Not all change is bad: coming reforms to credit default swaps

There is a lot of analysis and conjecture about how much impact the financial crisis has had on the global economy and financial markets. There has been considerably less analysis around the impact of the crisis on bond fund managers. In a small attempt to quantify these impacts, we have dug out a few old photos of members of the M&G bond team pre and post-crisis. The photos show clearly where …

Read the article

How to find relative value in EUR and USD investment grade credit using CDS

There is more than one way to skin a cat for credit investors. Those looking for credit exposure can do so through either owning the debt issued by an issuer or by selling credit default swap (CDS) protection for the same issuer. The differential in price between the corporate bond and CDS contract can mean the difference between outperforming and underperforming in a world of tight credit spre…

Read the article

Burrito Bonds – an example of the retail bond market

One of our local burrito vendors has been advertising a new 8% bond to its customer base. The company, Chilango, wants to raise up to £3m to fund expansion of its chain in central London. This will be done via a crowd sourced retail offering that’s already drawn some interesting coverage in the financial press. Having performed some extensive due diligence on the company’s products as a team, w…

Read the article

Sell in May and go away – does it work for European fixed income?

As is usually the case on 1 May, there was a plethora of articles and commentary on the “sell in May and go away” effect. If you are unfamiliar with this highly sophisticated trading strategy, it involves closing out any equity exposure you may have on 30 April and re-investing on 1 November. Historically, U.S. equities have underperformed in the six-month period commencing May and ending in Oc…

Read the article

Video – some thoughts on emerging markets from Hong Kong and Singapore

I recently visited Hong Kong and Singapore to attend some conferences and meet clients in the region. While travelling, I put together a short video to share some of our views on Asian emerging economies and emerging markets in general.

As recently reported in Claudia’s Panoramic outlook here, following both the 2013 sell-off and the recent EMFX volatility experienced earlier this year, investo…

Read the article

The Great Compression of peripheral to core European risk premiums

Are investors still compensated adequately for investing in peripheral rather than core European debt, or has the on-going convergence eroded debt valuation differentials altogether? In his latest blog entry, James highlighted five signs indicating that the bond markets consider the Eurozone crisis resolved. Inter alia, James pointed out that risk premiums for peripheral vs. core European high …

Read the article