Category Archives:

Corporate bonds

Panoramic Weekly: Bonds take a bath

The bond sell-off that started last week with the publication of strong US data continued over the past five trading days, even if Friday’s job report came in below expectations and a slew of global data and events only confirmed a worsening momentum: the International Monetary Fund (IMF) cut this year’s world economic growth forecast to 3.7%, down from 3.9%, citing challenges to trade; Italian…

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Panoramic Weekly: Stars and Strikes

Global bond markets reacted sharply to Wednesday’s release of US Services data, which struck its best mark in 21 years: US 10-year yields spiked to 3.2%, the highest since 2011, while the dollar reversed a gloomy September to recover its August level. The usually less reactive 30-year Treasury yields surged, leading some investors such as M&G fund manager Richard Woolnough to argue that the mar…

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Watch Your Step: Cliff Edge risk in European High Yield

This has not been a vintage year for total returns in the European High Yield market: wider spreads have led to small capital losses, barely offset by a relatively low income of 3.2%, which has resulted in an anaemic total return of 0.22% year to date. Unexciting and dull? Yes, but only if one looks at the surface. The underlying trends are far more interesting – and relevant for investors.

Eve…

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The impact of the technology tantrum on US corporate bond valuations

It is fair to say that markets have become more lively of late. One sector in particular has been the epicentre of revived market volatility – Technology.

In the US high yield market, the US tech sector has weakened relative to the broader US high yield market. Given higher leveraged balance sheets, high yield bonds tend to be more sensitive to sector specific headwinds.

The chart below shows t…

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2017 investment grade review – a rising tide lifts all boats

Let’s be honest, 2017 won’t go down in history as the most exciting year for investment grade (IG) credit markets. IG credit spreads have moved more or less in one direction only: lower and lower. Still, there are valuable lessons to be learnt. Here are our key takeaways.

Positive mood swing in Europe drove EUR IG outperformance vs USD IG.

Back in early 2017 the logic was as follows: After the…

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Trump should reappoint Yellen. Also: credit spreads are tight, Tesla, Laffer’s napkin and other stuff.

  1. The Fed Chair choice should be obvious for Trump.  Yellen all the way.  I don’t understand why he would choose Taylor.

President Trump is likely to announce his choice for the next Fed Chair by the end of this month.  Whilst current Chair Janet Yellen is still in the running, she has been slipping down the betting over the past few weeks.  There are three good reasons why (from his perspectiv…

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The decline of covenants in the European leveraged loan market

Guest contributor – Chris Mansfield (Investment Graduate, M&G)

The sustained demand for high yield bonds and European leveraged loans over the past few years, combined with improving corporate fundamentals, has led to strong performance from both asset classes. The large amount of capital available for issuers of higher yielding assets has placed the bargaining power squarely in the hands of th…

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BVTV: Time for a check-up of the US healthcare sector

Heated debates about proposals to repeal and replace Obamacare, generic pharmaceuticals feeling the pain of pressures on drug prices and lingering event risk around potential mergers and acquisitions – there are many reasons to take a closer look at the US healthcare sector right now. On my recent research trip to Chicago I discussed these and other topics with Laura Reepmeyer, Managing Directo…

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State-owned corporate bonds: there is no such thing as an implicit guarantee

A couple of weeks ago, state-owned International Bank of Azerbaijan (IBA) shocked its bondholders by announcing a surprise restructuring. The bank’s capital ratio turned negative at year-end 2016 due to large currency losses as a result of the depreciation of local-currency Manat (AZN). The International Bank of Azerbaijan bonds (IBAZAZ) 5.625% 2019 bonds were trading above par and dropped by 1…

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Is a telecom acquisition spree set to kick off in the U.S.?

Last week, the U.S. Federal Communication Commission (FCC) announced the results of the latest $20 billion, 600Mhz spectrum auction. Communication companies were bidding for spectrum over which they provide wireless services to their customers.  The largest bids came from wireless mobile operator, T-Mobile USA, which spent $8 billion, and U.S. satellite TV provider DISH Network, which spent $6….

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