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…
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…
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…
Bankers are fond of saying “bad loans are made during good times.” With equity markets reaching new highs, volatility and interest rates hovering around historic lows, positive economic growth, and increased merger activity, we could characterize today’s environment as the “good times.” Since credit markets run in cycles alongside the broader economy, investors need to…
The big drop in US Treasury yields this year has once again confounded the consensus. Benchmark ten-year Treasury yields have declined from 3% to around 2.5% in under five months. Investors that took duration risk were handsomely rewarded, as 30-year long bonds have returned 12.2% year-to-date through May 23, the best performance over this period…
Parts of China’s “shadow banking system”—broadly defined as the non-bank credit and funding markets—have some troubling similarities to US securitization markets circa 2007–08. Specifically, the “guaranteed returns” and off–balance sheet nature of certain products—as well as a “borrow short and lend long” asset-liability mismatch—are worrisome features, particularly considering that the area, which barely existed in…
Given the tremendous growth in debt-financed activity, investors are rightly wondering whether China is near a tipping point where its credit boom becomes a credit bust. China recently made headlines when it allowed its first ever bond default. A second smaller bond default has occurred in the weeks since. Add to that various news stories…
We maintain our neutral positioning for municipal bonds As prices fell and yields rose in the latter half of 2013, investors pulled money from muni bond funds, forcing managers to sell bonds in an increasingly illiquid market. Conditions reversed around year-end into 2014 as Treasury yields have fallen, money began flowing in, and issuance plummeted….
While cap-weighted benchmarks for bond portfolios remain the norm, indexes based on other criteria are increasingly available. Benchmarks are an essential tool for investors to monitor and analyze overall portfolio performance, as well as the success of investment strategies and managers. Comparing manager performance against benchmarks also can help inform decisions about whether to use…