Few people would have guessed right after the collapse of Lehman Brothers, ten years ago this week, that a golden decade for bond investors laid ahead – but it has happened: as many as 92 of the 100 fixed income asset classes tracked by Panoramic Weekly have delivered positive returns, with 17 of them offering triple-digit returns. The 2008 crisis’ most-battered asset classes, such as High Yiel…Read the article
Global bond markets sank over the past five trading days, as what started being idiosyncratic problems in specific Emerging Markets (EMs) spread throughout the bond universe: only 14 of the 100 Fixed Income asset classes tracked by Panoramic Weekly posted positive total returns. The rest tumbled, mostly dragged down by the risk-off scenario (such as High Yield debt) or by exposure to rising rat…Read the article
There is much talk about how tight US High Yield (HY) spreads are, especially relative to their Investment Grade (IG) peers. The difference between the two, of 241 basis points (bps), is less than half of what it was a decade ago – making some market observers quickly conclude that US HY looks expensive, so investors should favour IG bonds instead. But, is this the full story?
I believe there i…Read the article
The ongoing financial meltdown in Turkey, increasing risks of more US sanctions on Russia and a repricing of China High Yield (HY) bonds – on the back of higher defaults and increased trade war tensions -, have all resulted in a significant widening of Emerging Market (EM) HY corporate credit spreads. Investors are now getting paid 525 basis points (bps) over US Treasuries for investing in EM “…Read the article
It is fair to say that markets have become more lively of late. One sector in particular has been the epicentre of revived market volatility – Technology.
In the US high yield market, the US tech sector has weakened relative to the broader US high yield market. Given higher leveraged balance sheets, high yield bonds tend to be more sensitive to sector specific headwinds.
The chart below shows t…Read the article
Some of the worst performing bonds in the European high yield index in 2017 all had weak Environmental, Social, and Governance (ESG) scores according to MSCI. Is this is a coincidence or is it indicative of a relationship between poor ESG metrics and bond performance?
To find out the answer, we analysed the 2017 total returns of the 365 bonds in the European high yield market that were ESG rat…Read the article
Short term US dollar interest rates continue their march higher. 3-Month USD LIBOR recently hit 1.61%, fuelled by the Fed’s 25 basis point hike on December 13th, a level last seen in late 2008. With further rate hikes on the horizon in the US and a potentially more hawkish European Central Bank, is 2018 the year when floating rate high yield meaningfully outperforms its fixed rate cousin?
The s…Read the article
When investing in companies of a lower credit quality, loss given default risk is the key threat that investors have to assess. Consequently, covenant protection is a crucial consideration before lending capital to a company. We wrote about covenant protection back in 2014 and it’s fair to say that covenant quality in the high yield market hasn’t improved much since then; actually quite the opp…Read the article
As James mentioned this morning the European high yield markets’ response to the Trump election victory has been fairly benign. The U.S. high yield market, as one would expect, has been a bit more pronounced, although not as severe as European equities or S&P futures. The U.S. CDX Index, a CDS index of U.S. high yield issuers much like Europe’s Itraxx Crossover, initially dropped nearly two poi…Read the article
After the surprise election result, market reaction within the European high yield market has been surprisingly muted. Here are a few key moves that show how the news is being digested.
In general, the market seems to be pricing in little to no impact for European risk premia, and even for the more potentially directly impacted companies in Latin America, the re-pricing has been very mild.
It …Read the article