Global bond markets rallied after the US Federal Reserve (Fed) signalled on Wednesday what financial markets had been pricing in for months: the central bank will most likely retract from its rate hiking plans this year, given the global economic slowdown, lower oil prices and generally muted domestic inflation. The Fed also indicated its balance sheet may not shrink as much as expected as it n…Read the article
As we all know, 2018 turned out to be a tough year for most asset classes, not least High Yield (HY) bonds. The sell-off in the fourth quarter was particularly quick and brutal compared to the recent lulls of benign volatility under the blanket of central bank largesse. Global HY lost a few percentage points in pure local currency terms in 2018, whilst the lower beta and more senior secured hea…Read the article
Not that we needed anybody’s reassurance, but the UK government’s decision that pension fund trustees must consider financially material ESG (Environmental, Social and Governance) factors in their assessments, definitely helps those who believe that sustainability is becoming a need more than a choice – for society and investors alike.
In my view, an ESG lens can help monitor qualitative risks …Read the article
Few investors would have bet on emerging market (“EM”) corporate bonds fifteen years ago. In 2004 the EM external (also known as hard-currency) corporate bond universe was relatively small at approximately US$ 270bn. By 2009 the asset class had more than doubled to US$ 600bn driven by strong economic expansion across developing economies notably the BRIC countries. Since the global financial cr…Read the article
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…Read the article
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…Read the article
The ongoing financial meltdown in Turkey, increasing risks of more US sanctions on Russia and a repricing of China High Yield (HY) bonds – on the back of higher defaults and increased trade war tensions -, have all resulted in a significant widening of Emerging Market (EM) HY corporate credit spreads. Investors are now getting paid 525 basis points (bps) over US Treasuries for investing in EM “…Read the article
Prices of most global corporate bonds rose over the past five trading days, as above-expectations US economic data fuelled the dollar, took US equities to new heights, and the International Monetary Fund (IMF) confirmed its US growth prospects while cutting those for the Eurozone, Britain and Japan. The risk-on optimism left behind Emerging Markets (EM) sovereign debt, hit by the protracted US-…Read the article
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…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