Category Archives:

Treasuries

The BoE and ECB render the US bond market the only game in town

Now that the Bank of England has commenced purchases of gilts and committed to a programme of corporate bond buybacks, alongside similar measures being presently undertaken by the ECB, it is worth taking a step back and thinking about valuations in sterling fixed income.

Let’s take a brief look at what has happened so far in 2016 in government bonds. The ultra-long conventional gilt has returne…

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Is now the time to buy long-dated USD IG corporate bonds?

Credit curves are usually upwards sloping; as you’d expect, investors require more of a credit risk term premium for lending for a long time than for a short time, all else being equal. As the charts below show however, the steepness of USD IG non-financial credit curves has become rather extreme in 2014. At year end, the asset swap (ASW) spread differential between c. 25 years and c. 2 years w…

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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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Long term interest rates – the neglected tool in the monetary policy toolbox

I was recently fortunate enough to see a presentation by Phillip Turner from the Bank for International Settlements (BIS) on a paper he published earlier this year. ‘Benign neglect of the long term interest rate’ is a highly informative and interesting piece. In it he argues that after decades of the market determining long term interest rates the “large scale purchases of government bonds have…

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