Category Archives:

macro and politics

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UK politics: “The most difficult election to call in the post war period”

As the old adage goes, markets don’t like uncertainty. And yet in just under two months we have a UK election, about which the only degree of confidence that anybody has is that the UK will have a second successive hung parliament – the key question is whether the UK ends up hung to the left, or to the right, or we get a potentially painful outcome somewhere in between.

So we thought it worthwh…

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Video: Jim & Mike go to NY to ask the big question. Will the Fed hike in 2015?

Have you seen the film The Day After Tomorrow? The one where U.N. officials foolishly ignore climate scientist Jack Hall (Dennis Quaid) and a super-storm plunges New York into a new Ice Age? Well it was colder than that last week when Mike and I made a research visit over there. With wind-chill it was a billion below. I was only able to survive by laughing at Mike forgetting to wear a hat and g…

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Coming to a bond market near you: “A Brave New World: Zero Yield Corporate Bonds”

Picture the scene: a meeting room, 40 floors up, plate glass floor-to-ceiling windows with views of central London in the background. At the polished mahogany table sits Hans Schmidt, the CFO of a major consumer global goods company. In walks Chad “Ace” Jefferson III, the latest in a long line of investment bankers assigned to cover his company. Behind Chad follows an entourage of five impeccab…

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2015-01AD blog

Europe needs a German fiscal stimulus package but won’t get it

The German government can theoretically borrow at negative yields if it were to issue short maturity debt today. Longer maturity debt is also yielding a record low amount. Could the collapse in yields be a blessing for Germany and Europe? Two economists at the International Monetary Fund (IMF) seem to think so. Indeed, the German government’s narrow-minded pursuit of the “black zero” (a balance…

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Long US Treasury bonds are overvalued by 250 bps. Discuss.

As we started 2014 the US Treasury market was expecting 10 year yields to be at 4.13% in a decade’s time. This 10 year 10 year forward yield, derived from the yield curve, is a good measure of where the bond market believes yields get to if you “look through the cycle”, and disregard short term economic trends and noise. I wrote about it here and suggested that we were approaching the top of th…

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Emerging market fixed income – 2014 performance

Emerging Market debt: 2014 returns post-mortem and 2015 outlook

2014 was quite an eventful year for Emerging market (EM) fixed income. After a period of strong performance which lasted all the way to September, markets corrected significantly in the latter part of the year as the escalation of the Russia crisis and the plunging oil prices triggered the most significant drawdown since the “taper tantrum” of June 2013. All in all, emerging markets still poste…

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EM Asia corporate bonds have outperformed in recent sell-off

After the December rout, where is the value in EM corporates?

It’s this time of the year when banks and other investment research providers have released their outlooks for the coming year. For the EM corporate bond asset class, Asia was forecast to be the best performer in 2015, with most top picks being in India and China.

Most 2015 outlooks were released in late November or early December, when EM USD corporate bonds were boasting a solid 6.1% total re…

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The M&G YouGov Inflation Expectations Survey – Q4 2014

Today we launch the next edition of M&G YouGov Inflation Expectations Survey which polled over 8,200 consumers across the UK, Europe and Asia.

The Q4 report reveals that consumers’ short-term inflation expectations continue to moderate across most regions, although they remain well above current inflation levels. Long-term expectations remain resilient despite this year’s low inflation environm…

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A rallying bond market means duration lengthens

Either longer dated index linked gilts are very vulnerable, or the UK economy is

If at the beginning of 2014 you had made a list of what you thought would be the best performing fixed income asset classes globally for the coming year, it’s very unlikely you’d have put UK index-linked gilts at the top. It’s probably even less likely that you’d have put Argentina’s (hard currency) bond market in second place, especially if you had been told that Argentina would default in 201…

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Bretton Woods competition winners: 15 signed copies of Ed Conway’s The Summit go to…

The following 15 people correctly answered that President Richard Nixon effectively ended the Bretton Woods era in 1971 by suspending the convertibility of the US dollar into gold.  Thanks everyone for entering – we will contact the winners by email to arrange delivery of the book.  If you didn’t win, why not try the Bond Vigilantes Christmas Quiz

  1. Frank Markey – Wells Fargo
  2. Doug Brodie – Maste…
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