Category Archives: Fixed Income

Bridging the Volatility Gap between IG and HY

The goal of the S&P U.S. High Yield Low Volatility Corporate Bond Index is to construct a high-yield bond portfolio with low credit risk and low return volatility by applying a low volatility factor.  Does the index methodology truly deliver the effect of reducing volatility?  The back-tested results of the 17-year period ending Feb. 28, Read more […]

Rising Rates Arrive

Which of the figures below belong together?   It’s obvious, even if analogies aren’t your strong suit, that A is like C and B is like D.  A and C are not like B and D. The economic relevance of this simple visual exercise is this: At its March 2017 meeting, the Federal Open Market Read more […]

Asian Fixed Income: From Implicit Guarantees to Bond Defaults

Chinese authorities will allow market participants to buy onshore bonds through transactions carried out in Hong Kong, which will further broaden foreign access to China’s onshore bond market. While no additional details have been provided, a “bond connect” scheme that provides cross-border cash bond trading is anticipated by market participants. Despite currency volatilities, China bonds Read more […]

No News, and No Implications

This morning’s Wall Street Journal reported, rather breathlessly, that “U.S. bond yields are topping a key measure of the dividends that large U.S. companies pay—a shift that has broad implications for investors….”  The headline was triggered by the observation that the 2.50% “yield on the 10-year U.S. Treasury note…exceeded the 1.91% dividend yield on the Read more […]

The Rise of Green Bonds

Green bonds can play an important role in engaging institutional market participants in the transition to a low-carbon and climate-resilient economy. They can help to meet the United Nations Framework Convention on Climate Change goal of limiting global warming to 2°C above pre-industrial temperatures, along with the climate mitigation, adaptation, and finance commitments as set Read more […]

Monetary Cycles and the Fixed Income Market – What Can the Past Tell Us About the Current Cycle?

Rising rates are generally seen as bad news by fixed income market participants.  As rates go up, prices of fixed income assets are expected to go down.  However, returns (or losses) can vary depending on characteristics of the cycle, as well as the amount of income or carry available to cushion the decline in price. Read more […]

High Yield Bonds in a Rising Rate Environment

Since the “taper tantrum” back in 2013, the prospect of the Fed easing monetary policy has been one of the top concerns for global market participants.  The Fed has increased rates twice since then: once in December 2015 and again in 2016.  With more rate hikes expected and U.S. inflation firming up, long-term interest rates Read more […]

Longer-Maturity and Lower-Rated Sukuk Continue to Outperform

The Dow Jones Sukuk Total Return Index (ex-Reinvestment), which seeks to track USD-denominated, investment-grade sukuk, had a great start in 2017 and rose 1.24% year-to-date (YTD) as of Feb. 10, 2017. A total of 19 sukuk with total outstanding par of USD 15.75 billion were added into the index last year; however, no new sukuk Read more […]

Rieger Report: The Uncorrelated

Why worry?  New highs for the U.S. stock market indices will keep coming, right?  Just in case, this might be a good time to examine asset classes that are not correlated to the equity market or the “uncorrelated”. Corporate bonds of the issuers in the S&P 500 are tracked in the S&P 500 Bond Index.  As a group Read more […]

Under Armour Falters, but Consumer Discretionary Stays Positive

The sports apparel and footwear company Under Armour recently experienced a highly publicized loss of stock value, based on a couple of missteps.  The first misstep was falling short of Wall Street’s earning expectations, which caused multiple brokerage firms to downgrade their stock recommendations.  The second was inaccurate forecasting of the company’s revenue; it only Read more […]