As the U.S. yield curve flattened to just 45 bps (2s-10s) last week, we dug out something I wrote back in 2007, in the early days of this blog. A chart that accompanied the blog showed that a) U.S. BBB credit spreads had hit their tightest level for nearly 3 decades and b) that the yield curve had flattened substantially (and in fact inverted). If you pushed the yield curve shape chart 18 mon…Read the article
Good performance after an exceptional 2016
2017 was another good year for high yield investors with the global high yield index delivering a total return of 8.0% (in USD terms), albeit this was less exciting than the 16% achieved in 2016. The US continued to outperform Europe but at a far more modest rate compared to 2016, with a 7.5% local currency total return vs Europe’s 6.7%, although much …Read the article
On 22nd December last year, President Trump enacted probably the most significant achievement to date of his presidency by signing the Tax Cuts & Jobs Act of 2017. The precise implications of tax law changes can be fiendishly complicated and difficult to assess due to the numbing complexity of the legislation and individual companies’ tax planning arrangements. However, in broad strokes, I be…Read the article
Towards the end of this year, a December spike in the cross currency basis for major currencies against the dollar grabbed the market’s attention. But what is cross currency basis (“the basis”)?
Consider a European company taking a one year loan from its domestic local bank to fund its US operations abroad. In order to hedge the currency risk, the company enters into a one year EUR/USD currenc…Read the article
After four calendar years of price appreciation, it looks like the US dollar will end 2017 deeply in negative territory. The dollar has fallen by almost 12% this year versus the euro and around 8% on a trade weighted basis. More surprisingly, the sharp depreciation of the dollar against the euro has occurred in a period when central bank policy has diverged, resulting in the yield differential …Read the article
- The Fed Chair choice should be obvious for Trump. Yellen all the way. I don’t understand why he would choose Taylor.
President Trump is likely to announce his choice for the next Fed Chair by the end of this month. Whilst current Chair Janet Yellen is still in the running, she has been slipping down the betting over the past few weeks. There are three good reasons why (from his perspectiv…Read the article
I’m just back from a fascinating research trip to Mexico City, to meet with policymakers, bankers, politicians, analysts, pension funds and regulators. Like many emerging market economies, the Mexican economy has suffered over the past couple of years due to lower commodity prices and weak global demand for goods. Of course, Mexico has had its own unique challenge with Donald Trump’s election…Read the article
Heated debates about proposals to repeal and replace Obamacare, generic pharmaceuticals feeling the pain of pressures on drug prices and lingering event risk around potential mergers and acquisitions – there are many reasons to take a closer look at the US healthcare sector right now. On my recent research trip to Chicago I discussed these and other topics with Laura Reepmeyer, Managing Directo…Watch the video
Despite US rate hikes in December, March and another last week, the US dollar has depreciated back to pre-election levels. All of the Trumpflation dollar premium has disappeared. As the Trump dollar trade appears to have run out of steam, the Euro has however been climbing. Optimism around the Euro area growth comeback grew leading up to the ECB meeting earlier this month, with EUR/USD hittin…Read the article
According to recent reports, leading foreign football players in the English Premier League are looking to get paid in euro rather than sterling. Since the UK referendum result in June last year, sterling has fallen by 12% against the euro, so it is unsurprising to see that some players have questioned the denomination of their salaries. It is not the first time that global stars have asked to …Read the article