Sharing our convictions

Douglas Charleston looks at the development of the European ABS market in the second quarter of 2022 and explains what this could mean for investors going forward.

US banks remain bullish about the health of the consumer, but credit spreads are still pricing in not only a recession, but a fairly severe one. Are the banks wrong? Or have credit markets just backed up too far on negative fund flows?

With yields on B rated CLO bonds now as high as 18%, Elena Rinaldi looks at various scenarios for corporate default rates and questions why investors are overshooting even the most pessimistic scenarios.

With corporate bond spreads having risen to not far short of crisis levels, Johnathan Owen argues the 4%-plus yields on offer in short dated investment grade are an attractive entry point for investors that might not be around for long.

With Heimstaden showing its commitment to corporate hybrids with a €600m tender offer, Pierre Beniguel looks at the complex decision issuers have to make and says more could follow suit with bonds trading at steep discounts.

European ABS and CLOs had a turbulent Q2 as broader macro headwinds sparked heavy selling, but investors have made good use of direct trading to pick up bonds at prices not seen since Europe’s sovereign debt crisis.

Political chaos is once again taking the headlines in the UK, but bond investors should be cheering the UK regulator’s decision to raise banks’ capital buffers in preparation for an anticipated economic downturn, says Gary Kirk.

With investors seemingly unwilling to put money to work until they see clear evidence of the inflation trend reversing, Felipe Villarroel looks at two developments that tentatively suggest central banks’ delicate balancing act is actually working.

After H1 2022 broke market records for all the wrong reasons, Gary Kirk says fixed income outflows could reverse quickly if investors see evidence that central banks are turning the tide on inflation.

How can you find growth in times of panic? Difficult markets are not to be feared. Investors need an optimistic resolve and a clear roadmap: identify businesses with sustainable and predictable earnings streams, pricing power, and lower leverage, and avoid stocks trading at exorbitant multiples that are vulnerable to higher discount rates.

The US high yield market has experienced the third lightest month in terms of new issue flows since the Global Financial Crisis. Chris Holman explains what this means for default rates going into the second half of the year.

In this fixed income mid-year outlook, Portfolio Manager Carlos de Sousa, explains why the overlooked and much maligned emerging market local-currency asset class may be the phoenix of fixed income.

Aza Teeuwen explains how market moves have impacted BB CLOs and looks at historic trends analysing their behaviour during crisis scenarios.

At this stage in the economic cycle investors may need to think about ways to protect their portfolios while providing strong relative value. Johnathan Owen explains why short dated investment grade can offer exactly that in his latest blog.

With Fed rate hikes continuing and the economy progressing into late cycle stages, Mark Holman presents his expectations from the Fed going into the second half of the year and explains why he believes Treasuries can provide the protection investors may need.

For all of these observations, there is one common observation – yields did not stay at these high levels for very long.

After two COVID-hit years last week the European ABS market decamped once again to Barcelona for the 26th annual AFME & IMN Global ABS conference.

After 18 months of difficult headlines Credit Suisse could ill afford more negative press, and we therefore welcomed its decision to refinance its 7.125% Additional Tier 1 (AT1) bond last week at its first call date.

In fast-moving markets there is no perfect time to provide an update on valuations.

Inflation rates have been rising for over a year now. While the increasing levels may eventually moderate, inflation is still likely to be with us for some time, especially with the Russian invasion of Ukraine exacerbating post-Covid supply constraints.

Given the widening of spreads in Additional Tier 1 (AT1) bonds, in line with general spread widening across all of credit, the prospect of AT1s not being called on their first call date is beginning to generate a few headlines again.

Here we lift the lid on how typical ESG scoring models work in fixed income, with the help of some real-world examples that will help explain why some companies score well and others poorly. Some of the results will surprise you.

Given inflation has been running hot for more than a year now, it was no surprise to see the recent dip in US data greeted with a muted sigh of relief across the markets.

The past couple of weeks have seen a flurry of new issuance as rates and credit markets have stabilised, and the European summer lull is approaching fast.