The cost of security: The impact of higher defence spending on debt-laden nations The cost of security: The impact of higher defence spending on debt-laden nations

When analysing long-term investments, the primary focus is naturally on the potential total returns. Your final profit is simply a function of the future actual returns of the investment, less the original cost. In the realm of fixed interest bonds, this calculation is relatively straightforward. For instance, you can estimate the likely return using the redemption yield, as the coupon is set, and the redemption date and value are known. This predictability allows for a clear definition and  a strong approximation of future profits. However,…

Admittedly, as a native German speaker, I may be biased. But I genuinely believe that the German language has given the world some of the most ingenious and downright beautiful expressions. And I don’t say that just out of patriotism—words like Schadenfreude and Zeitgeist have become global hits. Now, I think it’s time for investors to forget one German word—Schuldenbremse—and add another one—Sondervermögen—to their vocabulary.

Bond valuations are impacted both by fundamental and technical factors. Active mangers typically have experienced Fund Managers and credit analyst teams to analyse the fundamentals impacting each bond issuer. The focus of this blog will be on the technical factors – which are more in the trading team’s domain.

“How are you going to screw me?”…That’s a question a US investor asked an investment banker who was offering a trade that seemed too good to be true. Michael Lewis told the story in a 2008 article, when, understandably, trust in Wall Street banks wasn’t at its peak. I think it fair to say that, thanks to changes in regulation and culture, many of the games played on investors pre-GFC (Global Financial Crisis) are far less common today (does anyone remember CDO-squareds?). But the banks still have smart people who are capable of finding little gimmicks that make trades look better than they really are at first glance.

This time of year is for thinking about the ones we love. For those of us who spend their working week in the corner of the 7th floor at 10FA, that ‘one’ is bond markets. When I was thinking about what I wanted to say in this blog, I was going to write about ‘what to love about bond markets now’. But of course, you don’t love only someone or something for what they offer right now, you love them throughout the economic cycle. So…

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.