Most emerging markets debt assets are not priced to achieve investors’ objectives Over the last decade EM currencies have appreciated significantly against the US dollar in real terms and seem unlikely to generate attractive returns going forward given limited carry. Local currency EM sovereign bonds have attractive nominal yields, but real yields, which drive returns,…
This question has been asked since 2009, and despite the unwavering unanimity of economists and market watchers that sovereign bond yields are once again set to rise—the latest Wall Street Journal survey, for example, shows 100% of economists expect the US ten-year yield to rise by the end of 2014 (average forecast: 3.04%), June 2015…
Given that credit creation is the raison d’être of modern central bankers, the fact that European bank lending remains anemic despite a plethora of new measures from the European Central Bank (ECB) seems to us substantial cause for concern. The ECB’s pronouncements and alphabet soup of new programs have been remarkably effective at bringing down…
On August 8, President Obama signed the Highway and Transportation Funding Act of 2014 (HATFA-14) into law, thereby temporarily maintaining the solvency of the Highway Trust Fund. Approximately two-thirds of the financing for the law came not from transportation-related sources, but rather from an extension of the relief granted in 2012 to single-employer pension funds…
The market for labeled green bonds—bonds whose proceeds are specifically “ring-fenced” for environmental or climate mitigation or adaptation projects—has grown rapidly since the first green bond issue in 2008. Growing diversity of issuers, larger average issuance size, and estimated full-year 2014 issuance of $40 billion (half in corporates) all suggest that the green bond universe…
On July 23, the SEC voted in a set of long-debated reforms to the rules governing money market funds (MMFs). The reforms, which will take effect in 2016 to allow managers and investors time to adapt, are aimed at preventing a replay of the dangerous 2008 run on MMFs triggered when the Reserve Primary Fund…
The launch of the new Treasury floating rate notes has been a successful venture The initial auction for Treasury FRNs saw aggressive participation, with a high bid-to-cover ratio. The ratio came down slightly in subsequent auctions. Quarterly issuance has so far exceeded early predictions, and these securities have already assumed an important place in the…
A string of headlines over the last few months has thrust the issue of cash held by the foreign subsidiaries of US companies back into the spotlight. First was Apple Inc.’s announcement that the company was increasing its dividend and buying back more stock while at the same time issuing $12 billion in debt to…
Yes, but prepare to average back in as soon as rates approach fair value, and consider moving out to the longer end of the curve. We recommend maintaining neutral allocations to risky assets, but are placing a greater emphasis on diversification given we are at a more advanced stage of the economic and market cycle…
Summary Observations: Fiscal Year 2014 US equities returned 24.6% in the fiscal year ended June 30, 2014, ranking 31st in 114 fiscal years of data. The health care, information technology, and materials sectors all returned above 30%. All developed markets ended the fiscal year in the black, with Europe ex UK the best-performing region and…