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Opportunities in Spanish ABS

As fund managers it’s our job to take risk when and where we are being paid (preferably overpaid) to do so. One area where I feel that this is currently the case is European residential mortgage backed securities (RMBS), particularly Spanish RMBS.

It’s fairly easy to find senior Spanish RMBS trading as much as 100bps wide of equivalent covered bonds at the moment. The collateral in these deals …

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The M&G YouGov Inflation Expectations Survey – Q3 2013

Despite high unemployment rates, excess capacity and a sanguine inflation outlook from the major central banks, it is important to keep an eye on any potential inflation surprises that may be coming down the line. For instance, we only need to look at ultra easy monetary policy; low interest rates and improving economic growth to see that the risk of an unwelcome inflation shock is higher than …

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Titanic Issuance: Is This The Year Of The Covered Bond?

We have been musing for a while now the impact of new financial regulations on bank funding and how banks will structure their balance sheets going forward. I speculated a couple of months ago that banks would likely begin to fund themselves by issuing a combination of covered bonds and contingent capital. My sense is that the demand for contingent convertible capital in the market is currently…

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Here’s why Spain’s in trouble

The convention in the market is to estimate a country’s degree of distress by looking at the yield spread over a ‘risk free’ rate.  So in the case of eurozone countries, people tend to look at the spread over German government bonds.

While this spread is clearly important, it’s more relevant to look at the absolute yield level if you’re trying to figure out whether a country’s debt is sustainab…

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