Persistent structural weaknesses, imbalances, and financial fragilities. These were some of the ways in which the International Monetary Fund (IMF) described the Italian economy in its most recent country report. Almost a decade after the great financial crisis, Italy’s economic prospects remain dim, with the costs borne disproportionately by the working age and younger population. With no gove…Read the article
As the U.S. yield curve flattened to just 45 bps (2s-10s) last week, we dug out something I wrote back in 2007, in the early days of this blog. A chart that accompanied the blog showed that a) U.S. BBB credit spreads had hit their tightest level for nearly 3 decades and b) that the yield curve had flattened substantially (and in fact inverted). If you pushed the yield curve shape chart 18 mon…Read the article
In its 2016 Annual Report entitled ‘making tomorrow a better place’, Carillion claimed they had ‘a good platform from which to develop the business in 2017’. Less than ten months after publication, Carillion went into compulsory liquidation, bypassing administration and the chance to continue trading. Assets will be realised and distributed to creditors, leaving little or no value remaining. Bu…Read the article
First of all, our thoughts are with those impacted by Hurricane Irma and other recent weather-related disasters.
Beyond the human tragedy and economic costs, these are typically low-probability, but potentially high-impact, events that can ultimately impact an issuer’s ability to service its debt obligations. As bond investors, we aim to assess the various risk factors related to the companies …Read the article
Another month has drawn to an end, which presents a good opportunity to take stock and review recent events and Bloomberg’s surprise monitors – true to their name – have provided some unexpected results in August.Read the article
Though the recent US Treasury report did not name any country as a currency manipulator (see more details on this in Mario’s blog), the monitoring list centres on larger economies that meet the following criteria:
- The country has a significant bilateral trade surplus with the United States defined as more than USD 20 billion.
- The country has a current account surplus of at least 3% of GDP and …
Switzerland has made headlines of late as a potential candidate to be labelled a currency manipulator by the U.S. Treasury. For those countries at risk, a report recently published by the U.S Treasury sets out three key criteria the U.S. Treasury will use in order to assess whether a country is “pursuing unfair practices”. Firstly, the country would have a significant bilateral trade surplus wi…Read the article
Capital markets have experienced a major shift in sentiment over the course of the last couple of months. Fears over secular stagnation and deflation have dissipated, and investors have been willing to embrace risk assets again. Many economists have revised upwards their estimates of global economic growth, starting first with the US where the fiscal reigns are expected to be loosened in order …Read the article
1. On the face of it, long term US Treasury yields are looking fair value, having traded on the dear side since the middle of 2014. Below is a chart you will have seen before on the blog as I’ve been using it for some time. It shows the relationship between the Fed’s long term expectations of short term interest rates (taken, with a pinch of salt, from the FOMC’s dot plots) and the bond marke…Read the article
President Trump’s anti-Mexico rhetoric has made Mexican assets one of the key calls in emerging market debt. I have just returned from a research trip to Mexico where I met with local economists, analysts, and corporate bond issuers. Below are a number of observations from my time there.
Donald Trump won the election on a fairly protectionist rhetoric – with a special focus on Mexico – and the …Read the article