2019 proved to be a spectacular year for returns in most asset classes and emerging market debt was no exception. Returns were driven by a combination of cheaper valuations to begin with and also helped by the market-wide U-turn in going from pricing in Fed hikes to cuts and by the subsequent US rate rally. Some key risks were also priced out as the year moved on, including the US-China trade…Read the article
Last night, the US Treasury designated China as a currency manipulator. This has occurred a few times in the past, most recently in 1994. Though China has been on the Treasury’s watch list for some time (alongside several other countries), given that the most recent Treasury report published in May did not name China a manipulator, it begs the question, what has changed between then and now?
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A decade on from the Global Financial Crisis after multiple rounds of QE across the developed economies, we are stuck with mediocre growth rates, the anticipation of renewed policy easing and the prospect of yet more bond buying from the ECB.
Yet much of the academic research into the impact of QE suggests there are diminishing returns from successive bouts of bond purchasing. It also seems…Watch the video
When looking at the risk premium embedded in the extra return you receive in owning corporate debt versus “risk free” governments, one of the factors that we have to take into account is the less liquid nature of corporate bonds. This adds to the potential risk premium from a liquidity and transaction cost perspective. A constant theme since the financial crisis has been the belief that the cra…Read the article
Just when you thought the Fed had well and truly killed the carry trade, a surprisingly dovish Mario Draghi reminded markets yesterday that Europe remains a very different place from the US. Having previously argued that the ECB never pre commits to forward guidance, yesterday marks something of a volte-face. ‘The Governing Council expects the key ECB interest rates to remain at present or lowe…Read the article