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Which corporate bonds has the ECB been buying?

Having recently blogged about the potentially eligible universe of the Corporate Sector Purchase Programme (CSPP), we were naturally eager to find out which corporate bonds the European Central Bank (ECB) has actually been buying. On Monday, the ECB eventually published the highly-anticipated list of their bond holdings.

Except that’s not what happened. Instead of the ECB releasing a neat conso…

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Richard Woolnough’s views on the U.S. economy and bond markets. A video.

In the second part of the video from our recent New York research trip, M&G’s Richard Woolnough takes a look at three more topics. Firstly, the U.S. labour market is strong and inflationary pressures are building. The Federal Reserve is currently on hold due to external events, but maybe not for long. Secondly, while the lower oil price by and large is beneficial for Western economies, bond val…

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The perpetual bond market in Brazil is misrated

In developed markets, the vast majority of perpetual bonds are contractually subordinated, i.e. it is stated in the bond documentation that they are junior to any senior secured or unsecured debt, and as a result they tend to have lower bond ratings than senior bonds in the same capital structure because they have a lower expected recovery value. In emerging markets, however, it is not uncommon…

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What makes a good forecaster? Superforecasting – a book review

I spent a significant chunk of the weekend with my head buried in a great book; Superforecasting: the Art and Science of Prediction. In this book, Philip Tetlock and Dan Gardner tell the story of Tetlock’s experiments in harnessing the wisdom of crowds to predict the direction of geopolitical and economic events. Tetlock, a renowned social scientist, and his global band of volunteer forecasters…

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Brexit: The winners and losers in sterling high yield

Much has been written about the impact that the referendum result has had on gilts, the pound and equity markets. In sterling high yield bond markets, we have seen some repricing with the market 2% lower in price terms since the vote. In my opinion, this has been a fairly benign reaction if you consider that the FTSE 250 is around 10% lower over the same time period. One explanation for the mut…

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Didn’t make it to the FT Festival of Finance? We interviewed Pettis, Keen, White and Leaviss for their views.

A few of the M&G bond team recently attended the FT’s Festival of Finance. Known as the Glastonbury of the Financial World, M&G’s Anthony Doyle brought a camera crew along and interviewed a number of speakers on the day, including Michael Pettis (China expert), Steve Keen (of “Debunking Economics” fame), Alex White (political pundit from The Economist) and our own Jim Leaviss. Watch the upcomin…

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M&G Panoramic Outlook: The growing opportunity in corporate bond markets, by Richard Woolnough

Last year proved a tough year for investment grade corporate bonds, with credit spreads moving wider. Fast forward six months to today and the decision of the UK referendum to leave the EU is continuing to shake markets, with European credit spreads now even further elevated. It is nevertheless important to recognise that these bouts of volatility can however present buying opportunities as cor…

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The growing opportunity in corporate bond markets

Conventional wisdom suggests that equity markets are more diverse and better-performing than bond markets, particularly from an active investor’s perspective. However, the evolution of the highly dynamic corporate bond market counters this view. Over time, credit markets have matured to become an increasingly significant asset class, now offering a far broader range of investment opportunities …

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Real gilt yields have outperformed

The rise in UK inflation expectations since Brexit

I wrote ahead of the UK referendum that I felt front end index-linked bonds were a good way to play the uncertainty surrounding the result, given the fact that they have crucial non-binary hedge characteristics. Since the result, breakevens (i.e. the market’s expectation of future inflation) have behaved exactly as expected, rallying. The chart below shows how nominal yields have collapsed to r…

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A video from our NY research trip examining the US healthcare sector

It has been a while since we last uploaded a video from one of our U.S. research trips. Richard and I recently travelled to New York to meet with various local analysts and strategists. The timing of the trip could not have been better: the Federal Reserve needs to decide whether and how to continue its rate hiking cycle and event risk in the economy is high. We had the opportunity to discuss a…

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