Three things to love about bond markets this Valentine’s Day Three things to love about bond markets this Valentine’s Day

As part of our annual tradition, we reflect on what happens and how the investment world would look when Chinese astrology intersects with the world of finance.  In the Chinese zodiac, the snake symbolises wisdom and agility, while the wood element represents growth, flexibility and tolerance, nurturing the fire element that signifies vitality and change. This year, we focus on the China onshore bond market, where opportunities are emerging as the country continues to forge new paths through economic restructuring. A new skin for China’s…

The market moves we have seen over the last couple of weeks in government bond markets, particularly in gilts, have been fairly volatile in what was, at least in the first week of the year, a void of new news. It’s rare that fixed income hits the headlines in the broader press, but there have been plenty of column inches focused on what is traditionally regarded as a market that is a little bit mysterious.

In order to take a dispassionate look at this important discussion, we will focus solely on current long-term market-implied forecasts and work from there. The best way to explore this is to plot the 30-year interest rate swap. This represents the market’s pricing of average short-term interest rates over the next 30 years. This is the average cash rate. At times, the short-term rate will be above the long-term rate when central banks are running a more restrictive monetary policy, and at others, it will…

Emerging market (EM) high yield (HY) sovereigns have had a rip-roaring year: in 2024, they outperformed EM investment grade (IG) sovereigns by 12.7%, the most since 2015 (12.5%). What’s more is that this outperformance was founded on significant market-friendly reforms bearing fruit. These included recent moves to end FX distortions[1], tight/er monetary policies, sustained spending consolidation, and, in some cases, the emergence from long-winded debt restructurings[2]. Such reforms, coupled with attractive valuations, created promising opportunities for investors, especially in the distressed space. In addition there…

The base case macroeconomic scenario for 2025 is still in a state of flux given the uncertainties regarding policy, especially in the US. Hopefully, the fog will start dissipating in a few weeks once the new administration takes office, but it is possible that we will still be wondering what happens next for several months.

A few days ago, Bulgaria finally reached an agreement with Austria, removing the last hurdle that blocked its entry to the Schengen area. The EU council is now expected to approve the country joining the passport-free travel area in early December. This clearly represents a milestone in Bulgaria’s integration process into the EU and should help cross-border trade and investment. Meanwhile, a much more impactful achievement for the country’s economy – joining the euro area – remains elusive at the moment. Back in July 2020,…

Fans of the neo-classical Netflix drama ‘Kaos’ will be pleased to know that Eurydice was not alone in returning from the abyss. Followers of European bond yield differentials have witnessed a comeback story of similar scale: Greece can now borrow in world markets at similar rates to Germany’s at the 2-year mark, and below French bond yields across several maturities. Is this a bolt from Olympus, or have the Fates ordained a devious plan? As with all ancient Greek legends, Zeus’ Netflix downfall is announced…