Quantitative Tightening Raises the Risks for Markets
With inflation running at multi-decade highs, monetary policymakers are united in one of the most aggressive tightening campaigns in decades. Most central banks have already significantly increased policy rates this year, and some are unwinding their massive balance sheets, also known as quantitative tightening (QT). From what we know about QT, we expect it to […]
November 2022
Do Municipal Bonds Still Have a Role to Play in Taxable Portfolios?
Yes. Munis still have value on an after-tax basis over the long term, and their near-term outlook has improved following the rise in yields and spreads during this year’s sell-off. Still, the economic and policy backdrop remains challenging. Thus, we believe it is reasonable for most taxable investors to hold a reduced portion of their […]
August 2022
Should Investors Start Adding High-Yield Bonds and Loans to Portfolios Given the Recent Sell-Off?
No, as the risk/reward remains uncompelling and spreads may widen further if a recession ensues. However, the sell-off has enhanced our enthusiasm for collateralized loan obligation (CLO) debt, which offers attractive pricing, solid fundamentals, and lower interest rate sensitivity than most other credit investments. Prices for most credit assets have declined in 2022, as have […]
July 2022
Credit Investors Should Proceed Cautiously
Credit assets have sold off in recent weeks in unison with other risk assets, as market concern has shifted from one extreme of growth and inflation running too hot to another of stagflation, or even outright recession. Despite the improvement in credit pricing, we believe investors should be patient when adding to high-beta credit portfolios. […]
May 2022
Government Bond Yields Are Likely to Rise as Central Banks Remove Support
Long-dated government bond yields rose in 2021 on strong economic growth and surging inflation. Central banks have maintained their easy money policies despite the rapid recovery in economic conditions, likely keeping yields lower than they would have been otherwise. This may soon change now that several major central banks are starting the process of dialing back support.
December 2021
Rising Rates and the Implications for Fixed Income
In this paper, we analyze the drivers behind the recent rise in yields and compare the current bond sell-off to major bond sell-offs of the past to assess whether the rise in yields can continue and the implications for fixed income.
May 2021
Playing Defense in a Low-Rate Environment
Investors have predominantly relied on developed markets sovereign bonds for defense in balanced portfolios, but low rates have diminished their diversification characteristics.
January 2021
China’s Onshore Bond Market: An Update
Interest in China’s onshore bond market has been rising steadily since the market was thrown open to foreign investors. Yet foreign holdings remain relatively low. We think the market warrants further attention from global investors, given Chinese bonds continue to offer higher yields and lower correlations than those found in other major bond markets, with the potential to bring portfolio diversification benefits.
November 2020
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