Displaying items by tag: bonds

Science and technology have only recently begun to disrupt the active fixed income asset management industry, as they have so many industries before it...see the full story on our partner's site

The overall bond market is almost a bust this year but investors flocking for a yield can only go to one place, junk bonds. Lending conditions are very loose with all the accommodations both fiscal and monetary policy made this year, and those attempting to stream any income have to learn to high-yield debt. Inflation is eating up anything to be gained in treasuries. Investors are now treating high yield debt like a more liquid asset than ever purely because traditional bonds are losing to inflation. All of the policy measures have made many feel corporate debt is less risky than ever but the excess demand may be tipping, as even some of the riskiest debt is being sought after. Still high nominal economic growth is good for borrowers and reduces to investors.

FINSUM: Investors should be aware of interest rates pass-through from Fed tightening to corporate debt, strong inflation could lead to weaker pass through and even lower spreads than the market is already seeing.

The fixed income (FI) portfolios of institutional investors are evolving rapidly. Investment strategists around the globe are noting that, in the search for yield, many investors are...see more on our partner's site

The fixed income market is in some of the worst shapes in recent memory. Both government and corporate debt have lost a 15 year high of 4.4% this year. Regardless if inflation is being driven by central banks and trillion-dollar stimulus or the supply chain disruptions Powell is claiming the bottom line is inflation is eating at the ‘fixed income’ bond investors have relied on. The U.K., Euro area, and Japan haven’t exactly been a shelter dropping 7.5%, 8%, and 9.8% respectively. On top of all of this, the Fed and other central banks are tightening, eroding the value of existing bonds. There has been shelter if investors are willing to look to emerging markets, such as China but overall investors need to be more flexible and can’t rely on index bond investing to survive.

FINSUM: High-yield corporate debt is where investors are going to have to look domestically to get the return after inflation they are used to.

(New York)

The debt clock is reading ten minutes to midnight for Congress which seems gridlocked in a game of chicken that could cost the public. Goldman Sachs issued an internal note late last week that there is a material risk that congress fails to reach a consensus on increasing the debt limit. Mitch McConnell is currently reviewing two plans to present Dems that would allow them to reach a consensus on raising the debt ceiling. Treasury Secretary Yellen reiterated that the government will be cash poor to pay the bills if Congress fails to raise the ceiling. Some are calling for the Treasury to mint a $1 trillion coin in order to finance if Congress doesn’t raise the debt ceiling but Goldman says this scenario is unlikely.

FINSUM: Congress always comes around to raise the debt ceiling, but a new wave of Democrats and Republicans pose new risks that a mutual agreement can be met.