The Best Relative Value Trade We Have Ever Seen The Best Relative Value Trade We Have Ever Seen

When talking about the right or left in Latin America we need to make an important differentiation between what Latinos define as right or left versus Europeans. This is because, in Latam, the “right vs. left” debate is largely associated with the approach to governments’ fiscal stances, security, and corruption, and much less with immigration, sovereignty, and regional integration which are more common topics in the European discussion.

Paramount Skydance’s (PSKY) recent $110 billion acquisition of Warner Bros. Discovery (WBD) was one of the largest corporate takeovers in history. Despite the deep equity pockets acquiring parties, it required a massive $52 billion in new debt financing across investment-grade bonds, high-yield bonds and leveraged loans, making it one of the largest debt financings in history. For high-yield investors, we estimate that the $12.4 billion of new bonds, combined with the existing bonds, will represent somewhere between 1.3% and 2.0%+ of the ICE BofA High…

One of the many major economic events so far this quarter has been the move in France government yields. This is best illustrated by looking at how their risk has been priced relative to corporate bonds.

Robin Wigglesworth, author of Trillions and editor of the Financial Times’ blog Alphaville, has come to market with a new book and I’ve been entrusted with reviewing it.Though an avid reader, I find book reviews surprisingly difficult. Give too little or too much away, there’s little reason for anyone to read it. But, in the interest of avoiding spoilers, I will say this: Think you know about bonds? Think again. Bonds are now so firmly embedded in the financial landscape, that it is easy to…

Take two bonds from one issuer, with identical seniority, rating, and credit risk. Yet the credit spread, the portion of the yield above the risk-free rate that compensates you for taking that risk, is meaningfully wider versus government bonds than it is versus interest rate swaps – wide enough for it to be worth paying attention to. This is particularly relevant for strategies that aim to isolate credit risk and hedge away interest rate exposure. In those strategies, the instrument used for interest rate hedging…

Anyone who spent too much time on YouTube in the early 2010s will probably remember the Honey Badger. The Honey Badger is part of the Mustelidae family which includes Wolverines, Otters and, you guessed it, Badgers. They live mostly in Africa, the Middle East and India…and oh, they are super cute too.

Across much of the developed world, governments are spending an increasing share of their tax revenues servicing debt.

The bond market has taken control from Warsh and Bessent, and in some ways is now testing or even tormenting them.

For those who follow bank returns for a living, Japan’s push toward low-to-mid-teen RoE/RoTE (return on equity/return on tangible equity) over the medium term is one of the most striking re-ratings in the sector – a genuine regime change against the mid-to-high single digits of the past few decades.

For most of the euro’s existence, investors have operated under an implicit assumption: Germany would always be there.

It is 20 years ago this month that I sat in a pitch and listened to an investment bank describe their latest stroke of genius. In 2006, the Constant Proportion Debt Obligation (CPDO) was hailed as a financial innovation that appeared to offer something for nothing: a AAA-rated security paying a meaningful premium over cash.

European natural gas prices are rising again, storage levels are lower than expected, and memories of the 2022 energy crisis remain fresh. But does this really constitute a new energy crisis for Europe, and more importantly for bond investors, does it change the ECB’s policy outlook?

Why aren’t we talking more about El Niño?

In a world of tight credit spreads, one rating bucket flashes value. The European CCC index offers 1,306 bps over government bonds, suggesting generous compensation for taking credit risk.

We previously blogged on which area of government bond curves investors should have exposure to if they want to receive the greatest benefit from the passage of time. In a normal/upwardly sloping yield curve environment, the yield of a bond will fall (and its price will rise) the closer it gets to maturity. Or, as it rolls down the curve.