Bond Vigilantes

In this week’s podcast episode, Jim dives into the dynamic world of finance, economics and trends that are shaping our financial future. From paying homage to the late Charlie Munger, Warren Buffett’s right-hand man and a titan of val...

Probability of default lower from a fundamentally stronger, global wealth management led franchise. Loss given default (LGD) – tweaks to terms should alleviate (some) concerns. Extension risk – a good history of creditor friendly calls and self-inter...

Environmental issues are a key priority for the region’s policymakers, so it is no surprise to see them reflected in banks’ lending policies. Most Asian countries have signed up to the Net Zero 2050 pledge (Indonesia is an outlier here with a 2060 co...

As part of the ongoing rise in the popularity of ESG, markets have started paying increased attention to various governance indicators not only for corporates, but also for sovereigns. Many asset managers have already developed their own in-house m...

Demographic changes are set to have a significant impact on the world economy in the coming decades, as we have discussed on a number of occasions ( https://bondvigilantes.com/blog/2023/07/all-the-people-so-many-people-most-of-the-growth-in-emergin...

Debt is an integral aspect of modern economies and has long been hailed as a catalyst for growth. When wielded judiciously, it stands as a potent tool for economic development, providing the means to finance projects, expand operations, and invest...

There has been endless talk about the Bank of Japan’s (BOJ) brutally slow exit from yield curve control (YCC) and/or negative interest rate policy (NIRP), and what this might mean for global bond and currency markets. This week, the BOJ furt...

Duration can be scary. Will Uncle Sam be able to pay his bill before nightfall?. Midnight approaches following curve inversion. Will higher financing costs bite high yield issuers?. Sharks lurking beneath the inflationary waters. Real rates are back...

Dave Covey is M&G’s Head of Credit Research, and his specialist subject is financial credit. I caught up with him in this podcast, spending 30 minutes talking about the valuation of bank bonds. We also took a look at the ‘accidents’ in the financial system so far in 2023 (for example the Credit Suisse AT1 blow-up, and Silicon Valley Bank's collapse)

Jim Leaviss on the Treasury market’s valuation. Richard Woolnough on the macro environment and disinflation. Ben Lord on inflation. Claudia Calich on emerging market debt. James Tomlins on high yield. Panel discussion hosted by Andrew Eve, featuring...

Zombie firms are companies that exist on borrowed time. They struggle to generate enough profits to cover their debt obligations, yet manage to stay afloat thanks to lenient borrowing conditions. Higher interest rates will lead to increased borrowing costs for these entities, potentially pushing some of them over the brink and into insolvency.

Loathe as I am to give the oxygen of publicity to rival podcasts talking about the bond markets, I can make an exception for those where I am the surprise guest.  So I commend the A Long Time in Finance podcast run by Neil Collins and Jonath...

We are now 18 months into the Fed’s tightening cycle and many market participants, including us, have been surprised by the resilience of credit spreads. The option-adjusted spread for the Global HY index has dipped to the low 400s (bps), one of the tightest levels of post Global Financial Crisis observations. Little refinancing in the last few years means maturity walls are closing in for HY companies.

We are now 18 months into the Fed’s tightening cycle and many market participants, including us, have been surprised by the resilience of credit spreads, particularly in the high yield (HY) market where the option-adjusted spread for the Glo...

Bond investors should pay particular attention to the ECB’s Corporate Sector Purchasing Programme (CSPP) The ECB has committed to decarbonise CSPP consistent with the goals of the Paris Agreement, which aims to keep the global temperature rise this century well below 2 degrees Celsius. The strategy so far was to tilt holdings towards issuers with better climate performance.

Political developments gain centre stage 2023 marked a year of significant political developments in Thailand. The winds of change started with the general elections in May, which saw the opposition Move Forward Party securing electoral victory...

The ECB’s Governing Council decided yesterday to raise its policy rates by yet another 25 basis points. Unless European inflation stages an unexpected resurgence, the ECB has reached its terminal rate. There are two good reasons for the ECB to take the foot off the gas. Holding fire on rates for now might be the best course of action.

The kids may be back to school, but the summer weather seems to have saved itself for September here in the UK. A market that has stayed hot for a lot more of summer, however, is the US Dollar. The dollar has staged its strongest rally in over a yea...

Rising Debt Levels: The UK’s debt levels will most likely continue increasing due to ongoing fiscal spending and increased future spending toward a net zero economy. As debt levels rise, the government will need to issue more bonds, which should resu...

Inflationary pressures are clearly easing and will continue to do so for some time. But going forward there are some risks to the upside which are worth monitoring. The huge increase in money supply which happened during Covid caused inflation to rise as economies reopened and people had more money to spend. Now the reverse is happening: money supply is shrinking and inflation is falling.

Gabon has recently issued a debut $500 million blue bond, arranged by Bank of America and the Nature Conservancy. Credit enhancements ensured the bond had an Aa2 rating from Moody’s. These debt-for-nature deals are pitched as kill-two-birds-with-one-stone solutions. They aim to conserve nature and lower debts.

Abu Dhabi Islamic Bank (ADIB) recently issued an Additional Tier 1 (AT1) capital instrument. The ADIB bond is a sukuk, whereas the ENBD/FAB bonds are conventional. The market was taken by surprise as ADIB’s new issue rocketed from par to 104 in just a day, ending up trading at z+248bps.

Despite macroeconomic uncertainties and policy headwinds, Asian investment grade (IG) corporate bonds have demonstrated remarkable resilience and relatively benign drawdowns. This year, Asian IG corporates have also performed largely in line with the US IG corporate bond market, while modestly outperforming the Emerging Market (EM) and Euro IG Corporates (in local currency terms) While credit-specific challenges exist, the fundamentals of Asian IG corporate bonds remain largely stable.

Over the last few years government borrowing in Europe has been on the rise. The ONS recently announced that the debt/GDP ratio has (just) gone through 100% for the first time since the early 1960s. Sadly for our UK readers, there has been no improvement here. If the UK’s situation doesn’t improve, we’ll likely keep seeing our borrowing costs widen further.

An inverted yield curve is often seen as a potential warning sign of an economic downturn or recession. Investors are willing to accept lower yields on long-term bonds because they anticipate weaker economic growth and lower interest rates in the future. The Great Moderation was a period of relative macroeconomic stability characterised by reduced volatility in economic indicators.