Sharing our convictions

The Corporate Credit team reveals how they plan to navigate the fourth quarter of 2022

The first round of Brazil’s general elections will take place on Sunday, October 2nd, with former president Luiz Inácio Lula da Silva and the current president Jair Bolsonaro facing each other. Thierry Larose, Portfolio Manager at Vontobel, discusses how markets are viewing the two candidates.

With central banks speeding though their hiking cycles, a return to rates stability could allow investors to reap the rewards of bond yields that are unusually high for this point in the cycle.

After a decade of underperformance, are emerging markets (EM) equities on the road to recovery? The potential for stronger earnings growth, particularly in Asia, along with a widening differential in emerging versus developed market real GDP growth could be a catalyst for the re-rating of global EM.

With reaction to the UK’s mini-budget roiling markets for a second day, Felipe Villarroel looks at what higher rates and a weaker currency mean for the UK economy.

Partner and portfolio manager, Eoin Walsh, delivered the keynote address at the TwentyFour Fixed Income Conference in London on September 13.

Asset-backed securities (ABS) are a type of bond, typically issued by banks or other lenders. What makes ABS different to conventional bonds, such as government or corporate bonds, is that they are ‘secured’ against a diversified pool of loans with similar characteristics.

Additional Tier 1 bonds (AT1s) are part of a family of bank capital securities known as contingent convertibles or ‘Cocos’. Convertible because they can be converted from bonds into equity (or written down entirely), and Contingent because that conversion only occurs if certain conditions are met, such as the issuing bank’s capital strength falling below a pre-determined trigger level.

With US inflation data once again hammering markets, Mark Holman says that with US Treasury yields likely approaching their peak, a shift in sentiment for risk assets isn’t far away.

High inflation creates the illusion of falling carbon intensity, a common measure used to track greenhouse gas emissions from portfolios. It is critical for investors who are targeting Paris Aligned reductions to adjust for this issue. By using alternatives to revenue-backed carbon intensity tracking metrics, we can help maintain data integrity and save years of progress.

How much do listed companies contribute to emissions? We estimate they account for about 16.9 billion tons of greenhouse gases compared to a global total of 46.3 billion tons annually. These are needle-moving volumes. Investors can make a difference by working with management teams to encourage abatement plans.

Dillon Lancaster evaluates the impact of Powell’s Jackson Hole speech on inflation and why he believes next month is set to be a very important period for central bank meetings.

The circular economy, popularized by expressions such as “zero waste”, “right to repair”, or “from farm to fork”, is rooted in the knowledge that resources are finite. Companies that manage to reduce their consumption of raw materials are likely to increase their profits and market share, which will ultimately benefit investors. Past examples of corporate successes based on the circular economy include the Italian Vespa scooter.

Discussing sustainability matters with Chinese companies is rewarding and challenging. Part of it is fact-finding, part of it is education. But investors need to tread with caution, and little extras such as talking Chinese help, says Hong Kong-based ESG analyst Gayle Chan. She also explains the approach of mtx Equities, citing a concrete example.

With Europe facing an energy crisis and the UK bracing for a five-quarter recession, a strong allocation bias to the US seems a no-brainer. However, George Curtis says that when looking at relative value in fixed income, the decision is never that simple.

Investors are eyeing a peak in inflation once more after US data came in lower than expected for the first time this year, and with credit finally seeing positive flows again, George Curtis sees markets grinding tighter over the rest of the summer.

Fixed rate bond yields may have climbed as markets priced in higher interest rates, but both existing and new investors in floating rate bonds have more to gain as central banks keep hiking, says Pauline Quirin

With the Bank of England doling out a double dose of doom on UK inflation and growth on Thursday, Eoin Walsh says it is refreshing for investors to get such a candid assessment from a central bank.

With bank Additional Tier 1 (AT1) bonds broadly trading at a 10% discount to par and many being priced to perpetuity, Dillon Lancaster suggests investors are either missing or ignoring the solid fundamentals on show in Q2 earnings.

Pierre Beniguel explains why high yield issuers are selling new bonds at steep discounts to par value, and why this represents an opportunity to build potentially significant performance into fixed income portfolios going forward.

European ABS issuers largely held off on printing new deals in Q2 as broader market volatility saw spreads widen, but we are already seeing more investor-friendly structures and many favoured names are likely to bring deals offering markedly higher yields when activity picks up again.

With earnings season entering full swing, David Norris highlights some indicators to look out for when assessing the current state of the US economy and the resulting actions expected from the Fed.

Gordon Shannon reviews Q2 2022 in fixed income and breaks down the resulting risks and opportunities he sees in short term bonds.

A member from our Multi-Sector Bond team reviews the main market drivers in the second quarter of 2022 and explains how the Strategic Income team is tackling today’s environment.