Tag Archives:

government bonds

“Venetians, Volcker and Value-at-Risk: 8 centuries of bond market reversals”. Our interview with Bank Underground’s Paul Schmelzing.

It’s rare to find a piece of writing that EVERYONE in bond markets has read and is talking about, but in January, a blog by Paul Schmelzing on the Bank of England’s excellent Bank Underground site did just that.  Paul is a visiting scholar from Harvard University, working at the Bank of England to research foreign exchange policy in the era of Bretton Woods.  In the blog however he took a very …

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A wrap up of 2016 bond and currency market performance

Turning back the clock to the first week of 2016, fears of a Chinese slowdown and the Federal Reserve beginning to normalise rates hit stock markets hard. By Valentine’s Day bond yields had fallen to – what was then – all-time lows.  But we hadn’t seen anything yet. Ongoing ECB QE, Brexit, UK QE, novel Japanese monetary policy, president-elect Trump and ECB tapering. In a year of political and …

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Tantrums and tidbits: Government bond market déjà vu

I have been overwhelmed by a sense of déjà vu of late. Talk of rates not rising again this cycle (US), ever again (Europe), or even being cut even further (UK, Japan) prevails. Quantitative easing continues apace and could be set to broaden further, be that in its duration or via the inclusion of new types of assets. Economic growth appears to be stalling, corporate profitability is showing lat…

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With zero yields, the advantages of bonds over cash are gone

When investors buy or sell financial assets they try to analyse likely outcomes. This basically revolves around three main issues.

  1. What is the capital upside?
  1. What is the capital downside?
  1. What income is earned from the security?

The dramatic fall in bond yields means that this traditional approach to investing will have to be examined.

One way to do this is to model real world outcomes. …

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Why do people buy negative yielding bonds?

Guest contributor – Craig Moran (Fund Manager, M&G Multi-Asset Team)

The following blog was first posted on M&G’s Multi-Asset Team Blog, www.episodeblog.com. M&G’s Equities Team also regularly post their views at www.equitiesforum.com.

These are extraordinary times in financial markets. On a daily basis we are being bombarded with news headlines of political turmoil, market gyrations, forecasts…

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Mike Riddell’s work here is done

Mike Riddell, who worked in and around the bond team here at M&G for the past twelve years, has decided to move on. We can’t say where to yet, but it’s to another big bond fund manager and it’s a good move for him. Normally we’d ask the airbrushing team to have him removed from the official histories, but he did a great job for us and we are all sad to see him go.

Mike did a great job running …

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M&G Panoramic Outlook: The Case for Global Corporate Bond Investing

The euro’s 12-year low against the dollar is a mixed blessing for US companies. On the one hand, the US manufacturing sector is suffering from an uncompetitive currency and lower export revenues. But on the other, rock bottom European interest rates have given US companies an attractive opportunity to issue bonds denominated in euros and lock in cheap financing. For example, in the first quarte…

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The downside of bonds

Government bond yields are extremely low across the globe. The highly unusual phenomenon of negative bond yields – even on debt issued by countries that still face a debt crisis – is now commonplace. In addition, investors are looking to protect themselves from the carnage in bond markets we have seen in recent weeks  (for example, the “risk-free” German 2.5% 2046 bond is down -19% since the hi…

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Goodbye to War Loan: 1917 to 2015.

Today, the War Loan issued in 1917 to help finance Britain in World War 1 is finally redeemed. We’ve written about it repeatedly over the years as it has always fascinated us. Was its coupon cut in 1932 a form of default from the UK government? Does George Osborne’s claim that it is being redeemed this year as a result of a tight grip on the public finances ring true?

To commemorate this most i…

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Demurrage – a tale of gold, cash and mercenaries

Historically I’ve struggled with the concept of gold as an investment. Presumably if you bought gold for this purpose you would want to store it somewhere safe and insure it. However, investors in gold should account for the fact that there is a cost to sleeping well at night. Vaults and insurance don’t come for free, and that cost can be thought of as a negative yield or the demurrage of gold….

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