Best Fixed Income Paper 2020
- 07 Dec 2020
FTSE Russell wins Best Fixed Income Paper 2020
Fixed income as an asset class has been far from immune from ESG analysis, but most fixed income ESG papers seem to focus upon green bonds or ESG integration in a general sense. FTSE Russell's winning paper, on the other hand, gets very specific with their analysis, narrowing the scope of examination to U.S. residential mortgage-backed securities. Adopting YieldBook's ESG Taxonomy, they provide details of responsible (and irresponsible) lending and servicing practices for the RMBS market.
WINNING PAPER: FTSE RUSSELL
ESG Taxonomy for Securitized Products (FTSE Russell, 2020)
Using YieldBook's ESG Taxonomy analysis suite, FTSE Russell applies a bottom-up methodology for sustainable analysis to the residential mortgage-backed securities market. Responsible lending practices are defined in opposition to predatory behavior and risky loans. Similarly, predatory servicing practices are either unfair, deceptive, or fraudulent in nature.
HIGHLY COMMENDED PAPERS
Bonds Have Style: A new model for capturing bond risk premia (Qontigo, 2020)
Qontigo's analysis shows that the premia from style factors in fixed income markets can in fact be harvested for smart-beta investors. The five parsimonious style factors that they define are Beta, Size, Momentum, Value, and Steepness. The authors also look at four currency-related quality factors.
Informed Trading in Government Bond Markets (Bank of England, 2020)
Academics and central bank employees examine secondary market trading activity within the UK government bond market. Hedge funds may be capitalizing on anticipated demand from other fixed income investors and acting quickly to realise gains in these situations. There is also some evidence that mutual fund trading activity positively correlates to gilt returns, possibly due to more accurate short-term interest rate forecasting.
Fixed Income Quarterly Report, Q4 (Federated Hermes, Nov 2020)
Despite presently being mired in a sea of viral concerns and political risk, Federated Hermes posits that the outlook is broadly favorable for corporate credit investors. Credit spreads in most sectors remain wider than their long-term averages, but individual security selection and analysis has also become increasingly important. Total return and multi-asset credit investors should find their relative value framework particularly insightful.
Fallen Angels in Focus (MetLife Investment Management, Aug 2020)
Ever since the pre-viral oil price shock earlier this year, fallen angel risk (corporate debt issuers being downgraded to sub-investment grade) has been a topic of concern for credit investors. The coronavirus pandemic was also a significant shock to many credit sectors. In this paper, MetLife Investment Management examines 2020's cast of energy sector fallen angels, as well as the risk of downgrades within other sectors of corporate credit.
Q4 Fixed Income Outlook (PGIM Fixed Income, Oct 2020)
PGIM Fixed Income's Q4 outlook focuses upon near-term uncertainty, whereas in the longer-term, fixed income markets will likely be buoyed by moderate growth, fiscal and monetary stimulus, and continued downward pressure on credit spreads. After a brief macroeconomic overview, the document provides a significant amount of color on the outlook for specific sectors of the fixed income market.
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