Emerging Markets (EM) debt had a torrid 2018 as global macro risks (including general geopolitics and trade wars), softer EM growth and idiosyncratic stories (Argentina, Turkey), all repriced relatively expensive valuations at the beginning of the year. Are the new prices a better reflection of fundamentals? This will largely depend on the evolution of 5 key topics.
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- China-US – upside surprise…
Few people would have guessed right after the collapse of Lehman Brothers, ten years ago this week, that a golden decade for bond investors laid ahead – but it has happened: as many as 92 of the 100 fixed income asset classes tracked by Panoramic Weekly have delivered positive returns, with 17 of them offering triple-digit returns. The 2008 crisis’ most-battered asset classes, such as High Yiel… Read the article
There is much talk about how tight US High Yield (HY) spreads are, especially relative to their Investment Grade (IG) peers. The difference between the two, of 241 basis points (bps), is less than half of what it was a decade ago – making some market observers quickly conclude that US HY looks expensive, so investors should favour IG bonds instead. But, is this the full story?
I believe there i… Read the article
Creating a Eurozone-wide safe asset and thus diversifying sovereign risk within the currency union without the need for sovereign debt mutualisation – sounds like having your cake and eating it, doesn’t it? Well, according to the European Systemic Risk Board (ESRB), sovereign bond-backed securities (SBBS) might do the trick. SBBS are merely an idea, discussed in ESRB working papers, feasibility… Read the article
Some of the worst performing bonds in the European high yield index in 2017 all had weak Environmental, Social, and Governance (ESG) scores according to MSCI. Is this is a coincidence or is it indicative of a relationship between poor ESG metrics and bond performance?
To find out the answer, we analysed the 2017 total returns of the 365 bonds in the European high yield market that were ESG rat… Read the article
It was the best of times, it was the worst of times – to phrase it in a Dickensian way – for bonds of British automotive and aerospace components company GKN. After Melrose Industries, an investment firm specialised in turnarounds of manufacturing businesses, had made an unsolicited takeover bid for GKN on 8th January, GKNLN 3.375 05/12/32s have enjoyed capital gains of 1.7%, whereas the cash p… Read the article
Short term US dollar interest rates continue their march higher. 3-Month USD LIBOR recently hit 1.61%, fuelled by the Fed’s 25 basis point hike on December 13th, a level last seen in late 2008. With further rate hikes on the horizon in the US and a potentially more hawkish European Central Bank, is 2018 the year when floating rate high yield meaningfully outperforms its fixed rate cousin?
The s… Read the article
Yesterday we saw Inter Milan issue the first football related high yield bond since we saw Manchester United tap the market back in January 2010. Putting aside the natural tribalism of 2 of my esteemed colleagues (both Italian, both ardent AC Milan supporters), we decided not to invest in the €300m 4.875% 2022 bond.
In terms of fundamentals, legal claim, and relative value, the bond stacks up f… Read the article
Would you buy a 7-year unsecured bond at 6% yield from a B1/B+ rated Brazilian airline (first time issuer) with well-below-standard credit covenant protection for investors? Many did last week. Few would have a year ago.
This year, many emerging market bond investors have been tempted to lend further down the credit spectrum in search for higher yields. Strong inflows into the asset class combi… Read the article
Argentina’s recently issued century bond deal was unexpected in terms of timing and maturity. Century bonds in Emerging Markets (EM) are rare (we think the table below is pretty exhaustive) and they grab the headlines, especially when issued by a credit that has defaulted many (many) times, like Argentina.
Are century bonds that much risker?
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- Duration: As we wrote previously, the duration of …