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Fixed Income: Tailwinds, Term Premiums, and EMD

Fixed Income White Papers in Q2 2018

The following list of papers discuss a host of fixed income topic-matter, including sector outlooks for high yield, multi-asset credit, and the European NPL market.

Also herein, Robeco examines the term "premium" - will it bounce back to pre-QE levels as rates continue to rise, or will extraneous pressures continue to keep the yield curve flat?

Savvy Investor

Long Term Interest Rates: Perfect Storm, Buying Opportunity, or Both? (PGIM, Mar 2018)
(For compliance reasons, this paper is only accessible in the US)
Robert Tipp, CFA, addresses questions about the increase in interest rates recently in developed markets, including the effects from increased Treasury supply, a weaker dollar, and a rising Federal deficit.

Multi-Asset Credit: How a Dynamic Strategy Can Provide Return – and Safety – in Uncertain Times (PineBridge, 2018)
As rates begin to rise, some investors are considering alternative fixed income solutions such as multi-asset credit strategies. Herein, PineBridge discusses how MAC can potentially help investors find opportunities.

Bonds: Watch Your Term Premium! (Robeco, Apr 2018)
Robeco explains the term premium as a part of the return received by investors for owning duration risk, and explains that QE has compressed term premiums dramatically over the past decade.

Eaton Vance EM Debt Chart Book: recap of Q1 and outlook for Q2 2018
(For compliance reasons, this paper is not accessible in the US or Canada)
The Eaton Vance EM Debt Q1 Chart Book presents the results for emerging markets debt indices in Q1.

Second Quarter Cash Forecast (SSGA, Apr 2018)
This paper by State Street Global Advisors provides a forecast for cash in Q2 2018.

2018 High-Yield Bond Outlook (Wellington Management)
The market environment remains supportive of high yield bonds, but strategists at Wellington say that a reduction in risk exposure may also be warranted.

Reaping the Returns: 25 years of EMD investing (NNIP, 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
The EMD opportunity set has changed considerably over the past 25 years, and NN Investment Partners’ believes that hard currency EMD still presents a compelling source of returns.

Fixed Income Strategy: A mighty (tail)wind - BlackRock, Mar 2018
BlackRock looks at recent developments affecting interest rates and rate projections, shining a light on rising opportunities at the front end of the curve.

Can Emerging Markets Withstand Global Monetary Tightening? (Barings, Mar 2018)
Global central banks have stopped easing, with tightening likely to follow. Is the time to invest in EM behind us, or can these markets thrive as monetary conditions tighten?

EM Debt: Think Local (Currency) in 2018 (PineBridge)
The disparity between the growth rates of emerging markets countries and developed economies has been shrinking, as EM growth has slowed since 2009. Recent dollar strengthening also accelerated this trend.

Emerging markets corporate debt: Opportunities still attractive? (Wellington, Apr 2018)
Given long-term fundamental trends and supportive supply/demand dynamics, Wellington examines the attractiveness of opportunities in emerging markets corporate debt.

The Non-Performing Loans Jigsaw Puzzle and The Road Ahead for the NPL Ecosystem (Oliver Wyman, Mar 2018)
Despite many improvements, progress in the reduction of non-performing loans (NPLs) and non-performing exposures (NPEs) post-global financial crisis has been slower in Europe than in Japan or the USA.

Video: Who's Afraid of Rising Rates? (AB blog, Apr 2018)
(For compliance reasons, this video is only accessible in the Americas and the Caribbean)
Investors perhaps ought to be more concerned about the end of the credit cycle than the effect of rising rates on their bond portfolios.

Narrowing the return gap: 10 steps in the right direction (Wellington Management, 2018)
In this paper, Wellington presents a series of incremental ideas that could potentially help to bridge the gap between high return targets and low return expectations.

Style Investing in Fixed Income (AQR Capital Management, 2018)
AQR examines style-based investing, and whether it is feasible for the fixed income market.

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