Talks between Greece and its Eurozone creditors to extend its bailout may again break down and thus trigger more volatility for local assets, but the potential for contagion to other asset markets is contained for several reasons. All involved parties have strong incentives to eventually reach an agreement. Even if they can’t, the fact that…
We maintain our neutral positioning for municipal bonds Though yields have moved below the 2% level that we previously viewed as a threshold for underweighting munis, other factors have changed the equation. Treasury yields have plunged as well, and ten-year Treasuries currently yield less than ten-year munis. Muni issuance remains quiescent, with new issuance at…
This chart book presents representative marketable and hedge fund manager performance for fourth quarter and calendar year 2014. US Real Estate Investment Trust (REIT) managers posted the largest median returns for the fourth quarter (14.2%) and the one-year period ending December 31, 2014 (31.2%).
In many ways, 2014 was a tale of two halves as returns reversed in the second half. Renewed US dollar strength and falling commodity prices were key contributors to the reversal. This brief chart book looks at returns and other market metrics for 2014.
To herd investors into junk bonds and equities was no trouble at all—ZIRP and QE and a little rhetorical encouragement did the trick. To manage a comprehensive exit from those overvalued positions will prove a tougher undertaking. —James Grant, Grant’s Interest Rate Observer, August 8, 2014 For another example, please see our June 2, 2014,…
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,…
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…
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…