Tag Archives: bonds
Understanding SOFR
In June 2023, the U.S. dollar London Inter-Bank Offered Rate (LIBOR) will likely be discontinued. The Alternative Reference Rates Committee has identified the Secured Overnight Funding Rate (SOFR) as the recommended alternative reference rate to replace USD LIBOR. SOFR is calculated as a volume-weighted median of transaction-level U.S. Treasury repurchase agreements data, reflecting borrowing cost…
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Preferred Stock and Senior Loan Solutions for Yield-Starved Investors
So far in 2021, the fixed income market certainly hasn’t been very fixed—instead posting negative returns—nor has it offered much income, with yields of just over 1%. U.S. equity and bond indices both posted strong performance in 2020, driving up asset class correlations and dropping yields to new lows. So, when the 10-year U.S. Treasury…
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The Fed’s Corporate Bond Purchases and Their Impact on Corporate Bond Issuance
In response to COVID-19 and its disruptive impact on the credit market, the U.S. Federal Reserve announced the creation of the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF) on March 23, 2020, to support the functioning of the credit market. The PMCCF provides a funding backstop for corporate…
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Active Managers’ Outperformance in Brazilian Bond Funds – Skill or Price Distortion?
There were impressive results for active managers in the Brazil Corporate Bond Funds category, with 93.6% of them beating the benchmark in March 2020 and 88.2% Q1 2020. However, were these performance results due to true skill? This outperformance may be related to a market distortion. On the one hand, Brazil’s corporate bond funds experienced…
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BBB Bond Downgrades Added USD 88 Billion to the High-Yield Bond Market YTD
In recent years, one noticeable development in the corporate bond market has been the rapid growth of the BBB bond market in terms of its absolute amount and relative share of investment-grade corporate bonds. We wrote a blog on this topic in May 2019 detailing the growth of the BBB bond market and its impact…
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Like the Virus, Credit Spreads Could Be at Risk of a Possible Second Wave
Ever since the Fed released its tsunami of credit, credit markets have rallied the most since the depth of the Global Financial Crisis. Continued central bank actions have driven the already existing trend toward demand for higher-yielding assets, helping companies issue debt with fewer lender safeguards and covenants. With the Fed willing to support the…
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Increased Supply of U.S. Treasuries and Interest Rate Risk
Since March 2020, the federal government has enacted four pieces of legislation to assist businesses and individuals weather the economic downtown triggered by the COVID-19 outbreak. According to the Congressional Budget Office (CBO), these four pandemic-related laws are projected to increase the federal deficit by USD 2.2 trillion in fiscal year 2020 and by USD…
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Delivering Low Volatility Exposure to High Yield Bonds
The last few weeks have been challenging for business the world over. People working from home and aggressive social distancing have led to business contraction and the expectation of rising default. On March 19, 2020, an S&P report expected that the U.S. trailing 12-month speculative-grade corporate default rate would rise to 10% within the next…
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How S&P DJI’s Fixed Income Indices Harness Data and Technology to Power the Markets of the Future
Thanks to the clever ad campaign by Policygenius, riders of the NYC subway have been reminded that we were promised glass-domed houses, flying cars, and vacation homes in outer space by 2020. Although robot maids may have come true via Amazon’s Alexa, they definitely fall short of the robot maid Rosie from the cartoon The…
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Bonds Saw Green in 2019, but They May Be Red in 2020
Rarely do we see all segments of the market go up in unison, but 2019 saw broad-based gains across stocks, bonds, and commodities. In fact, not a single sovereign bond index we track ended in the red. Considering 42 central banks cut policy rates in 2019, this may have been expected, but we would have…
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