It’s that time again. We invite you to take part in the Bond Vigilantes Christmas Quiz. Please send your entries into us by 5pm on Friday 19 December (email link below). The prize is £100 of Amazon vouchers, with second and third prizes of vouchers for £50 and £25 respectively. The quiz is open to all of our readers, clients or not – although M&G staff members will be playing for a crate of…Read the article
For all the talk of frozen credit markets, the figures showing new issuance may come as a bit of a surprise to some. November has been the most successful month for new non-financial deals this year (see graph on left). Companies have managed to issue new debt in spite of extreme risk aversion, risk aversion that can be seen in the huge sell off in equities and credit spreads hitting all tim…Read the article
Deflation fears meant that November was a phenomenal month for government bonds and investment grade corporate bonds. In local currency terms, US Treasuries returned +5.4% (the best month since November 1981), German government bonds returned +4.0% (the best month since at least 1985) and gilts returned +4.6% (the strongest month since October 1992)
Investment grade corporate bonds also perfor…Read the article
This second episode of historian Niall Ferguson’s series on the story of money and finance, The Ascent of Money, is probably worth a look. It’s apparently going to cover the development and importance of bond markets, and although it includes an interview with a minor US bond fund manager rather than one of your friends at M&G, it will be interesting.
Meanwhile it’s time for a quick competit…Read the article
I’m sure it won’t have escaped most people’s attention that the big American car makers are suffering at the moment – sales by the big three, GM, Ford and Chrysler were down 23% last month. Both GM and Ford announced last week that they have been spending their cash reserves at a hefty pace, and GM has said that it could run out of operating cash as soon as the end of the year.
This has lead so…Read the article
Yesterday it was announced that UK CPI inflation for the month of October was minus 0.2%. The annualised rate of inflation dropped from +5.2% to +4.5%, the biggest year on year drop in UK CPI since April 1992. Inflation expectations have plummeted. The 5 year breakeven inflation rate, i.e. the rate of inflation priced in by the UK index-linked bond market, is now -0.1%. In other words, the U…Read the article
Is it? Well kind of. Credit spreads (ie the excess yields on corporate bonds over government bonds) are very closely correlated to the strength of the underlying economy – when times are good, investors demand a small risk premium, and when things turn nasty, investors demand a much bigger risk premium. Right now, credit spreads are at almost unprecedented levels – see the chart in Richard’s re…Read the article
We talked about the possibility of Japanese-style zero interest rate policy (ZIRP) heading to the western economies in a recent blog. Today we had an unexpectedly large rate cut from the Bank of England, with the policy rate hitting 3%, its lowest level since 1955, when Winston Churchill was Prime Minister. In this link to a 3 minute video I recorded this afternoon you can look into my wild, st…Read the article
Since May 2007, we’ve seen the Great Credit Crash, with the fastest and sharpest sell off in credit that the modern world has ever seen. In the US, in May 2007, the average BBB corporate bond yielded just 120bps (ie 1.2%) over a government bond. The figure was 699bps as at the end of yesterday. BBB rated bonds now yield 10% on average in the US and UK, and almost 9% in Europe. This chart is…Read the article