Managing inflation: no easy options
A shift from ‘lowflation’ to a moderately rising inflation regime could bring with it greater dispersion in asset returns. While ultimately positive for investors, the transition may …
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Posts From Blue Bay Asset Management
Investing in the blue economy
Better ocean health is vital for addressing climate change. As fixed income investors, we’re seeing growing opportunities to make a difference. Carbon sinks have become pivotal in the fight against climate change. Simply put, they are areas that absorb more
Do emerging markets & ESG mix?
Anthony Kettle tackles the common misconception that emerging markets – which make up c.25% of the global bond universe – are behind the curve on this industry megatrend. While ESG is quickly becoming a big part of most asset managers’
Emerging Markets: Using illiquid credit to address long-term investment goals
Despite having successfully navigated volatile markets and the uncertain economic outlook in 2020, long-term institutional investors continue to face significant challenges. Surveys show 66% of pension funds consider themselves to be cashflow negative and 53% of those that are cashflow
Why pension funds should be allocating to European banks
"With deficits growing and the outlook uncertain, finding yield and assets that will benefit, rather than suffer, from the current policy response, is a growing problem. We believe cocos fit the bill for these issues."
Thinking out loud: market implications of US elections
The political priorities and policies of the government of the world’s largest economy and superpower evidently matters for international investors. The checks and balances in the US Constitution limit the room for radical changes in policy direction and typically market
The return of the Brexit saga
Like a long-running TV series, the latest season of the Brexit saga brings new drama and tension. Like all good drama, there are twists and turns in the plot, unclear motivations of key characters, complexity and new set-piece showdowns. Last
Accessing Dislocated Corporate Credit in Emerging Markets
Over the last five months, market participants have been following the COVID-19 pandemic as it has evolved into a global health crisis and forced various forms of lockdown across the world. The next 12-18 months …
What’s the impact of Covid-19 on ESG investing?
As the world starts to look beyond crisis management and focus returns to non-coronavirus-related objectives, improved regulation could become an unexpected ESG benefit of the pandemic. Back in 2019, all the signs were that 2020 was set to be THE
How we’re tackling Brazilian deforestation
Forest fires are harming both Brazil’s environment and its sovereign investment credibility. As bondholders, we’re taking action and driving engagement with policymakers to help preserve the country’s unique rainforest resource, which in turn supports its creditworthiness.
High yield update
High-yield bonds often deliver strong returns following a period of crisis – why is that and will it happen in the wake of COVID-19? Due to a higher-risk nature of its constituents (including the greater risk of default), the high-yield
How three policy responses impact bank balance sheets
The Covid-19 pandemic triggered a wave of support to keeps banks functioning efficiently and economies ticking over through lockdowns. We look at what action has been taken and its impact on the health of the banking sector.
Coco fundamentals line up for success
Investors have become familiar with frequent headlines on the latest regulations being implemented by European banks to improve their fundamentals. Should a slowing of this newsflow arouse concern? We believe the answer is …
Superior yield in a dislocated world
Cocos in 2020 In our view, growth appears to have reached an inflection point and is showing signs of a stabilisation, central bank policy remains extremely accommodative and recessionary risks are abating. However, we also see a world where corporate
EM debt: Our 2020 view
After a positive year of returns in 2019, what are your expectations for the asset class going into 2020? 2019 proved to be a positive year for emerging market (EM) assets, particularly those denominated in USD. Returns were robust despite
2020 Global Investment Outlook
Executive summary Global growth is near a point of positive inflection and recession fears should ease. The easing in financial conditions, moderation in the drag on growth from the US-China ‘trade war’ and credit and policy-supported stabilisation of the Chinese
US leveraged loans – behind the scenes
The US leveraged loan market has proven to be, until recently, resilient, despite facing a challenging environment over the past few years. Outflows from the retail component of the US leveraged loan market have been incessant for the past year,
The macroeconomic and political backdrop is highly uncertain as investors face the final quarter of the year.
Asset Allocation Navigator Fourth quarter 2019 Central banks cutting interest rates helps, but can’t fully offset the drag on growth from tariffs and trade policy uncertainty. The ‘skinny’ trade deal between the US and China suspends a planned tariff increase in mid-October, but
Structured credit: Direct from the desk
Structured credit has gone through a significant evolution over the past 10-years to emerge as a stable, well-regulated and, in our view, attractively priced asset class. With a more defensive profile than corporate credit, combined with compelling premiums, the asset
50 days from the hell of a hard Brexit
Britain appears to be sleepwalking towards a sticky end as the Brexit cli edge looms large. At least the outlook is brighter across the Atlantic, while a possible bottoming in China lifts risk assets. Soft economic data in the eurozone
Emerging markets and ESG: The challenge, the response and the opportunity
The carbon-based model of industrialisation is coming to an end. Emerging market governments have the opportunity to become trailblazers for the next era, one where ESG will play a pivotal role. The scale of the task and its urgency has
Waiting for ‘Bolso’
Emerging Markets Debt Update Global equities suffered last week as the release of minutes from the 25–26 September Federal Reserve (Fed) policy meeting were deemed marginally hawkish, leading to a sharp reversal higher in rates on the evening of the
ESG and fixed income:
The time is now? Bond investors have lagged their equity counterparts in integrating ESG considerations into portfolios. But with ESG occupying a bigger role in credit ratings, and investors showing more willingness to engage with issuers, the fixed income sector
Positioning on the Right Side
Investment Grade Debt Update The volatility in EM, Italy and Brexit are all likely to contribute to volatility in the coming months, selecting your hedges prudently and positioning on the on the right side of these events will be crucial.
Catalysts for alternative strategies
Evolution and reversals The peaks of the early 80s gave way to a compression trend for US Treasury yields that has lasted until very recently. This span of almost four decades – which covers the whole career of most active
Pain in Argentina – Emerging Markets Update
Weekly Update Developed market equities continued their march higher this week, with the S&P reaching new highs amidst positive earnings and optimism around a potential NAFTA breakthrough. When looking at developed markets performance, one could be forgiven for thinking all
Crap-onomics
EM continues to be in the driving seat with respect to broader market direction, with investor positioning in the spotlight. With financial markets in mid-summer mode, photographs from Venezuela this week served as a stark reminder of what can happen
Emerging Market Debt Update
No release Emerging market (EM) assets remained under pressure this week as Turkey refused to release Pastor Brunson amid the ongoing spat with the US. Italy also emerged as a source of concern for investors, with the Genoa motorway tragedy
Investment Grade Debt Update
If Brexit is Dead..! A strong US dollar has been the principal feature in global financial markets over the course of the past week. During the past quarter, we have seen US growth accelerate compared to moderation elsewhere and this
Spotlight on emerging market corporate credit
ESG integration in action ‘Who cares wins’. David Jones, the CEO of Havas Worldwide, wrote this book six years ago explaining why the most successful businesses in the future will be the ones that are most socially responsible. However, when
Pasta La Vista Baby
Investors remain on edge as trade tensions, market technicals and upcoming elections weigh in on sentiment Major bond market yields were little changed over the past week, with investors seeming to shrug off growing trade worries, as the Trump administration
Complacency – The Mother of All Evil?
Erdogan’s unorthodox stance against markets is a risky bet at a time of fragility in EM, leaving no room for complacency. Of all the headlines to impact financial markets of late, Erdogan’s assertion that interest rates are the ‘Mother of
Trump’s trade policy: the EMFX impact
In our view, an escalatory trade war could hurt Mexico and South East Asia most, while South America looks more insulated. The Trump administration is giving its protectionist, ‘America First’ instincts freer rein. Import tariffs of 25% on steel and
Enslaved by Bad Technicals!
Investment Grade Debt Update Emerging market assets have come under considerable pressure in the past week, following sustained weakness in EM from the start of April. In many respects, these moves seem quite surprising. Global growth data remains robust, with
Resurgent Dollar Dampens EM Spirits – Emerging Markets Update
Emerging Market Debt Update A resurgent US dollar spelled trouble for EM assets this week as EM local markets lost more than 1% to end the month down closer to 2.5%. Meanwhile, President Trump was back in the headlines with
Pause and refresh
After the eerie calm of 2017, the first quarter was characterised by high volatility, especially in US equity markets. We think fears for global growth and trade are overblown. The foundations for continued strong growth are intact and a trade
BlueBay Global Sovereign Opportunities Debt
Performance bounced back over the past week, with core yields marching higher and long risk positions in emerging markets (EM) performing well. Price action during the week developed somewhat counter-intuitively to the news flow, indicating that technicals are dominating over
Evolving as Expected
Investment Grade Debt Update Markets were much quieter over the past week after the fireworks of early February. Some aftershocks moved through equity and credit markets as is common after volatility blows up, but the sense of normalisation was clear.
EM Resilient but not Immune to Macro Volatility – EM Credit Market Update
BlueBay Emerging Market Debt Update Volatility in equities continues to be the dominant theme in markets with analysts pointing to the recent average hourly earnings figure as the catalyst, but many also pointing to technical reasons behind the sell-off. The
BlueBay Global Sovereign Opportunities Debt
Weekly update It has been a difficult week of performance for the strategy. Extreme volatility generated within US equity markets has driven weakness in European peripheral assets, especially Greece, and in emerging market (EM) hard currency government bonds. Yields in
Fragile five to one
Market insight Four years on, much has changed for Indonesia, South Africa, Brazil and India, while Turkey remains the ‘fragile one’. Investment opportunities nestle within the collective, while a new raft of fragility candidates for 2018 face up to geopolitical
The Greatest Stock Market Rally Ever
Investment Grade Debt Update With Trump championing the stock market and geopolitical risk waning, we wonder if bullish price action will reassert itself in February Global bond yields have continued to push higher over the course of the past week,
Higher Rates But Better Mood Music – EM Credit Market Update
Emerging Market Debt Update Equity markets continued to trade upward last week with the S&P reaching new highs. The mood music out of Davos was positive, with Trump striking a diplomatic tone and supporting fair and reciprocal trade, while at
Beginning of the end for beta cruising
With the QE regime coming to an end, so is the suppression of asset price dispersion. BlueBay’s head of credit strategy and asset allocation David Riley looks at capturing alpha as the economic environment turns on the beta trade. 20
Global Trade in a Spin
Emerging Market Debt Update A synchronised acceleration in global growth appears to be underway and it is creating a virtuous cycle of improved sentiment, easier financial conditions and higher asset prices. We have previously noted that inflation is the key
Deciphering Dollar Moves
The weak US dollar has meant financial conditions have continued to ease, while market moves could get more dangerous if positioning across investors becomes too consensual With world leaders gathering in Davos over next several days, the dizzying upward ascent
EM Local Currency Investing
Investor risk appetite brings new players to an expanding opportunity set Emerging market debt has seen record inflows across 2016 and 2017 as income-seeking investors seek out higher returns in reaction to the bleak yield landscape across much of the
Periphery Revival Spearheaded by Greece
Investment Grade Debt Update A continued benign backdrop and looming credit rating upgrades has push eurozone spreads tighter with new issues meeting strong investor demand. Global bond yields have continued to drift higher over the past week, as equity markets
December 2017 Leveraged Finance Review
High Yield Update Following a volatile prior month which culminated in a sharp rebound (although a still negative return) for Global High Yield (HY) markets, December was in comparison relatively muted with spreads and yields barely changed during the month.
Emerging Market Debt Update
Portfolio Manager Perspectives A weak US dollar and optimism over global growth created the perfect storm for a melt up in EM risk in the first week of 2018. Fear of missing out (FOMO) seems to be the order of
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