Credit/Fixed Income

Research Digest: Public Debt

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Capital Markets Research (CMR) is pleased to announce Research Digest, a new and improved version of Investment Publications Highlights (IPH). The inaugural edition explores the costs and benefits of public debt. The debate surrounding public debt is not a new economic or policy issue, but it has garnered increased attention following the rapid increase in public debt since the 2007–09 global financial crisis and the massive increase in fiscal spending in 2020 to address the COVID-19 crisis.

Room to Run for Muni Bonds

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Despite the recent volatility, in our view, munis continue to be an attractive alternative to both Treasuries and high-quality corporates for long-term taxable investors. Even tax-exempt investors that typically don’t hold munis may want to consider them in the current environment given relative valuations and credit fundamentals.

Life After Zero: Reassessing the Role of Sovereign Bonds with Negative Nominal Yields

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In recent weeks, as the COVID-19 pandemic spreads across the globe, nominal high-quality sovereign bond yields throughout developed markets have plummeted toward zero, increasing the likelihood that most developed markets may soon need to contend with negative yields, and leading investors to question whether high-quality sovereign bonds are still the best form of insurance. In light of these developments, we examine the historical safe-haven characteristics of high-quality sovereign bonds and assesses whether they remain a viable safe-haven asset when nominal yields are negative.

Credit Spreads Take Pensions for a Wild Ride

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As the COVID-19 outbreak has escalated in the United States, sponsors of single employer–defined benefit pension plans have experienced a roller coaster ride. Avoiding, or at least cushioning, another wild ride requires a well-designed hedging strategy that accounts for credit spreads. We provide context for this rapidly evolving spread environment and potential responses.

The Complex Relationship Between Inflation and Asset Prices

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As we write in March 2020, COVID-19 is spreading across much of the world, undercutting economic activity. While we are unsure of how this situation will unfold, we have long believed that the best way to guard against future uncertainty is to have a well-constructed portfolio. One key component in that is understanding the relationship between asset prices and inflation.