As value investors we would generally assert that every financial asset has its price. Few bond market offerings tick all the boxes, but if we are to be suitably compensated, and subject to certain red lines, we are generally sanguine.
Yesterday saw XPO Logistics, a third party US based logistics firm raise $2bn equivalent of debt across Euros and Dollars to part fund its acquisition of Norbert… Read the article
Ben Bernanke has spent a good deal of time explaining on his blog why he thinks interest rates are so low (something that Martin Wolf wrote a column on earlier this week). An extremely quick and dirty summary is low nominal interest rates and yields can be explained by low inflation, however this doesn’t explain why real interest rates are also low. Bernanke doesn’t think low real interest ra… Read the article
While generating a lot of concerns, one of the benefits of the strong growth of the emerging market (EM) corporate bond universe in the past decade has been the diversification of issuers. The asset class, which at $1.6 trillion is now larger than the US high-yield market, offers a vast number of countries and industries to invest in. Contrary to the EM rhetoric that has been making headlines i… Read the article
CPI in the UK today fell into negative territory for the first time, posting a 0.1% decline year-over-year. Airfares presented a meaningful drag on the April figures, owing to the timing of Easter compared to last year. Carriers increase their prices over Easter holidays, so when Easter moves between months this causes flight prices to move around, thereby affecting the headline inflation numbe… Read the article
We’ve seen a swift and rapid re-pricing of the bund curve in recent weeks, highlighting again the risk to capital that bond investors face when yields start to rise. All major bond markets in Europe have been impacted to some degree. Nevertheless one corner of the bond market has remained very resilient: floating rate notes.
We have highlighted before how these instruments have some potentially… Read the article
The US unemployment report for April highlighted the continuation of the economic recovery. The market is now in the habit of viewing a job creation number of anything less than 200,000 as a weak result for the labour market and anything more than 300,000 as a strong result. Anything in between and the conclusion amongst economists is this: the Federal Open Market Committee (FOMC) is on hold, e… Read the article
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… Read the article
Here are a few quick thoughts about things that happened last week.
First, the UK election and the failure of the opinion polls. Ahead of the General Election we met with several of the big opinion pollsters, and even ran a Bond Vigilantes x Politics event featuring Anthony Wells of YouGov. Without exception they highlighted how unusual it was that, whilst the Conservatives appeared to be neck … Read the article
Negative interest rates have become increasingly prevalent in Europe owing to the expansionary monetary policy measures with a number of central banks implementing negative base rates (Switzerland, and Sweden). Two weeks ago 3 month Euribor, (the reference rate for the majority of Pan-European Asset-Backed Securities (ABS)), followed 1 month Euribor (largely the preserve of most European Auto A… Read the article
The consensus view on the outlook for Emerging Market (EM) bonds is bearish. Many point to risks posed by a Fed rate hike, falling commodity prices, possible Grexit and a slowing China as reasons to reduce investment allocations to the asset class. However, there is a solid investment case for EM debt at this point in time for those willing to have a closer look.
Firstly, geopolitical events ap… Read the article