james_tomlins_100

Author profile

James Tomlins

Years in the bond markets: 13

Specialist subjects: High yield corporate bonds

Likes: Texas hold 'em, skiing, cars, history, pub quizzes

Heroes: Lord Palmerston, Horatio Nelson

high-yield-impact

The US election result impact on high yield markets

After the surprise election result, market reaction within the European high yield market has been surprisingly muted. Here are a few key moves that show how the news is being digested.

In general, the market seems to be pricing in little to no impact for European risk premia, and even for the more potentially directly impacted companies in Latin America, the re-pricing has been very mild.

It …

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fixedversus1

Fixed versus floaters: four reasons to like high yield floating rate notes right now

With the market currently pricing in an 84% chance of a US interest rate hike in December it appears likely that there is some pressure for bond yields to move higher on a medium term view. This is on top of the re-pricing that we have already seen in risk-free assets like US Treasuries over the course of the past four months. High yield assets are not immune from the laws of bond maths, with l…

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Brexit-Score-Blog1

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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Regional unemployment rates across the UK

A vision of the future? Optimal currency areas within the United Kingdom

The year is 2020 and King Henry IX, the recently installed head of state of the United Kingdom of Northern England, Wales and Northern Ireland stands in a room overlooking the Trent River. Most of his subjects still refer to him simply as “Harry”. His popularity with the electorate is seen as a key factor behind the surprise victory for the monarchists in the recent constitutional referendum fo…

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16.03.03-JT-blog

Growth fears, deflation, rising defaults, tricky markets – a good time to buy US high yield?

It’s been a difficult past few months for all risk assets, including the high yield markets. Weakest of all has been the US, with negative returns of almost 10% over the past year. As part of this re-pricing, spreads have widened significantly, with the US high yield market touching almost 900bps over treasuries. All-in yields also briefly peaked above 10% last month.

Underlying this has been …

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Trade History for Sprint 7.875% 2023

High Yield Liquidity: 5 ways to help deal with it

Following the closure of the Third Avenue fund earlier this month, liquidity issues are once again at the forefront of investor’s minds when it comes to the high yield market. Ultimately, conditions will only improve with structural changes to the market but in the meantime we think there are several steps that can be taken to help improve the underlying liquidity profile of a high yield portfo…

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Bullet dodging – European high yield in 2015

Bullet dodging – European high yield in 2015

As the year draws to a close, 2015 has actually been a solid if unspectacular one for the European High Yield market. Total returns of a little under 3%* compare well to negative returns in the US and Global High Yield markets. European default rates also continue to trend lower, hitting 0.14% for the last twelve months to the end of November according to data from Bank of America Merrill Lynch…

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Yield without commodity risk – 4 ways you can have your cake and eat it in the US High Yield market

Following another sell off, the US high yield market has once again touched the psychologically important 8% yield level today. This is an important valuation signal that has helped to tempt investors back into the market in recent months. However, the last move up in yields has been driven in part by a renewed downdraft in commodity prices, not least with WTI pricing in the low $40’s. Energy i…

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Commodity carnage and mayhEM – how exposed are High Yield markets?

We have seen a fairly swift and deep sell off in both commodities and emerging market equities over the past few months. The recent moves are now feeding through into a more broad-based sell off in risk assets. It appears an opportune time to take stock and see how exposed the various high yield markets are to these trends.

In order to assess any impact, I will firstly consider direct exposure,…

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2015-08 blog JT

Covenant case study: Change of Control

We’ve written in the past about some of the concerns we have over the gradual weakening of bond covenants (the legal language that protects the right of bondholders) over the past few years. However, today we have seen a real world instance of a bond covenant kicking in to the benefit of existing holders, namely the change of control. This illustrates how and why such covenants can help protect…

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