As has been widely reported, last week the Bank of England and HM Treasury extended their Funding for Lending Scheme (FLS). The FLS was originally launched in July last year with the intention of stimulating lending in the real (non-financial) economy. Under this scheme a bank or building society borrows UK Treasury Bills and hands over eligible assets as collateral. The fee they are charged (e…Read the article
Earlier this week, 5 and 10 year Spanish yields fell to the lowest levels since Q4 2010. The rally was no doubt kick started by Mario Draghi’s “do whatever it takes to preserve the euro” comment, and was given further fuel by the improvement in Eurozone economic data over the latter half of 2012, which was probably due in part to Draghi. However, the peripheral rally has continued this year in …Read the article
Stefan took some time off over Easter for a quick holiday in Zimbabwe and, as always, he remained on the lookout for economic insights.
As the only country to experience hyperinflation this millennium, Zimbabwe can certainly provide valuable lessons. From late 2008 its inflation was estimated to be running at a staggering 489,000,000,000% on an annual basis. The economy collapsed, and the popul…Read the article
Investors in government bonds – historically seen as a low volatile and safe asset class – have had to get to grips with assessing credit risk as well as duration risk in their portfolios. It is simply no longer the case that investors can safely lend to a government without first assessing the government’s willingness and ability to pay back the borrowed sum. This has had a large impact on gov…Read the article
Corporate bonds have had an incredible run over the past few years. A combination of sub-par growth, the sovereign crisis in Europe and massive amounts of QE on a global scale has driven government bond yields down to historically low levels. At the same time, corporate bond spreads have tightened significantly from the crazy levels we saw in 2009. This has meant double-digit annualised returns…Read the article
Back in 2009 the Bank of England (the Old Lady of Threadneedle Street) began buying a portfolio of investment grade bonds to provide funding to UK corporates, to aid liquidity in the corporate bond market and to supplement their QE purchases of gilts. Last Friday this investor sold its last corporate bonds.
This has been a great success from a profit point of view. The attached chart shows the …Read the article
The volume of new bond deals in the European high yield market has been very strong this year. One (unscientific) measure of this has been the growing pile of bond prospectuses on the desk; already the 2013 pile is more than halfway up the 2012 pile after just three months.
A marginally more robust measure is the data below published by Morgan Stanley. The year to date number of €25.2 bn is ru…Read the article