Category Archives:

rates and yields

Middle East research trip – a rare oasis of attractive bond valuations

My last research trip video to Asia was deemed by our marketing department to be so bad that we all had to be sat down and told what would be common sense to most people; apparently it’s not a great idea to speak to camera next to a busy airport runway, and you can’t see anything if you record yourself in your hotel room at night with the main lights off. So hopefully this effort is a slight im…

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High yield – it’s pickin’ time

It’s fair to say that we have been toning down our view on the high yield market of late. We could well see returns in the high single digits for 2013, but the potential for more substantial capital gains is less apparent in today’s context.

This does, however, ignore quite a powerful feature of the current high yield environment – the scope for exploiting opportunities and pricing dislocations…

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The chart annoying every Aussie consumer

In 2012, the Reserve Bank of Australia cut its cash rate five times and by a total of 1.25%. That is a big move in interest rates for an economy growing at 3.1%, an unemployment rate of 5.4% and inflation sitting bang-on target at 2.0%. The RBA cash rate is now equal to the 50-year low seen during the 2009 recession. So what has got the RBA so nervous?

One word: consumption. Around 54% of Austr…

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Le cocktail économique explosif français : croissance en berne, manque de compétitivité et tour de vis budgétaire.

This post was originally published on 5.10.2012 in English and has been translated for our French readers.

Depuis le début de l’année 2011, la croissance économique de la France s’est révélée extrêmement décevante, en passant d’un rythme annuel de près de 2,5 % à tout juste 0,3 % au second trimestre 2012. Certes tous les pays de la zone euro ont été à la peine durant cette même période, mais la…

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The toxic French economic cocktail: weak growth, poor competitiveness, fiscal tightening.

Since the start of 2011 French economic growth has been extremely disappointing, falling from an annual rate of nearly 2.5% to just 0.3% in the second quarter of this year.  Of course the whole Eurozone has seen weakness over the period, but French growth has lagged that of the “core” over the period.  German GDP growth was at or above 2% for all but the last two quarters, and now stands at 1%….

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European High Yield – stay in the game, but don’t bet the ranch.

We mentioned late last year that the high yield market had crossed into cheap territory as credit spreads went over 1,000bps. Historically this has proven to be a relatively robust signal to take a constructive view on the market, and it proved so once again. To use a poker analogy, it was like being dealt a full house – the odds were sufficiently in your favour that, even if you didn’t know ex…

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Climate change – bzirc monetary policy

As investors we get used to living within certain recognised bounds. For example, it has been commonly assumed that interest rates cannot be sub-zero. There has been the odd historical quirk when we’ve seen negative rates (Switzerland in the 1970s), but that’s more for amusement than general investment consumption. However, there now appears to be the potential for a major investment climate ch…

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RBA slashes interest rates – the lucky country is getting nailed

Today the Reserve Bank of Australia (RBA) surprised markets by cutting official interest rates by 0.5% to 3.75%. Weaker inflation data out last week and a deluge of soft economic data has got the RBA rattled. We’ve discussed bubbles down under on this blog before and think that a combination of a falling terms of trade, a current account deficit, a deleveraging consumer, below target inflation,…

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Central banks’ poor forecasting records and why the Fed may hike rates before late 2014

Central banking has evolved substantially in recent decades. Part of this evolution has involved a move towards greater transparency around a central bank’s forecasts and operations. The reason for this shift is because it is believed by many economists that by having a central bank communicate its objectives and forecasts, economic agents like consumers and businesses will make better informed…

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4 Housing Markets, One Country

The Eurozone has become a very extreme example of the dangers inherent of creating a single currency area populated with a myriad of different countries and regions. There is little doubt that the right monetary policy for Germany is not necessarily the correct one for Portugal given the underlying structural differences and lack of fiscal coordination.

However, closer to home, there could be a…

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