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Emerging Markets debt: 2015 returns post-mortem and 2016 outlook

Following on from Gordon’s review of the best and worst performing fixed income asset classes last year, I wanted to take a more in depth look at how emerging markets performed in 2015 and what to look out for in 2016.

Some themes that drove the market in 2015 were the same themes than drove it in 2014. Once again, asset allocation was critical. Local currency debt, for the third year running, …

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The best and worst performing fixed income asset classes of 2015

The best and worst performing fixed income asset classes of 2015

Looking back over the past year it’s evident that decent returns were much more difficult to achieve than in 2014. Within my sample of 85 different Bank of America Merrill Lynch bond indices (and as you can see from the smaller sample in the chart below) most indices fell within the -5% to 5% total return range for 2015, whereas most fell within the 5% to 15% range in 2014.

In 2014 though, mos…

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M&G Bond Vigilantes Christmas Quiz 2015 – the answers and the new champion

Thanks very much for another bumper stack of entries to the annual Christmas quiz.  This year’s winner, and new reigning champion is Jake Lewis of Morgan Stanley.  Congratulations, we will be in touch to see where you’d like the £100 charity donation to go.   You also win the Morrissey novel, as do the following brave runners up.  Gary Callow of Investec, (2014 champion) Marton Huebler of Fidel…

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Trade History for Sprint 7.875% 2023

High Yield Liquidity: 5 ways to help deal with it

Following the closure of the Third Avenue fund earlier this month, liquidity issues are once again at the forefront of investor’s minds when it comes to the high yield market. Ultimately, conditions will only improve with structural changes to the market but in the meantime we think there are several steps that can be taken to help improve the underlying liquidity profile of a high yield portfo…

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The effect of changes in oil prices on the price of one litre of petrol in the UK

Oil price fall failing to pump deflation

One of the major factors that has enabled inflation to stay low despite the economic strength in major western economies has been the fall in the price of oil. Given the huge price volatility over the past 18 months it is interesting to depict the falling influence of oil on actual end inflation.

In the UK, the most direct way that changes in the oil price affect inflation is through petrol pri…

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WTI Crude Oil futures curve

Damsels in distress – Chesapeake and distressed exchanges

2009 through 2013 were some very good years for the US high yield market. And the energy subset was no exception. Returning  51%, 13%, 9%, 12% & 6% in each of those years, it’s not surprising that the BofA Merrill Lynch US High Yield Energy Index practically trebled in size. Voracious issuance, much of it to fund shale oil development, was met with equally intense buy-side demand and with it ca…

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Three reasons why the UK will not raise rates anytime soon

With the Fed recently raising its interest rates via a unanimous vote, I’ve been wondering whether the UK will shortly follow suit. The market seems to think not, pricing in the first UK rate rise in Q1 of 2017, compared to two further US rate hikes in 2016. At face value this huge divergence feels strange; both countries are targeting (and undershooting) a 2% inflation rate, both have similar …

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15.12.18 MR blog

Tough as Granite – an RMBS case study

This weekend the team were doing more than just our Christmas shopping, we were also saying a fond farewell to one of our favourite investments of recent times – our Granite Residential Mortgage Backed Securities (RMBS).

Granite was the name that Northern Rock gave to the vehicle it used to securitise the mortgages that it originated before blowing up in 2007 – when it was no longer able to fun…

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Japan trip report – a video from Tokyo. Inflation, Abenomics and cute robots

We did a research trip to Tokyo last month. The main discovery by my colleagues Anjulie Rusius and Anthony Doyle was that I am “annoyingly good at karaoke”. I have to put my hands up to that one. Sadly for you my singing didn’t make it into the official trip report video. Instead we discuss why, counter to popular myth, Japanese policymakers might not want either a) a much weaker yen or b) any …

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15.12.15 SI blog1

Leverage ain’t always a shareholder’s best friend

The temptation to ‘juice-up’ shareholder returns with low yielding corporate debt has been too much to bear for many companies and their investors in recent years. This fad has been well documented and though it may not be a trend we creditors like to observe, we haven’t been entirely surprised to see it play out in 2015 given the seemingly large valuation disconnect between the cost of debt an…

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