A tale of two countries A tale of two countries

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…

Renewed concerns of European fragmentation: France’s economic and political struggles

The US, and consequently the global bond markets, were rightly focused on the November US election. With the election concluded, it is time to shift our attention from the 50 states to the state of the US economy, particularly the labour market, which is a key economic indicator for policy decisions. Unlike in the past, not all jobs statistics are moving in the same direction and as a result, we are receiving mixed signal from the labour market. Take for example the JOLTS (Job Openings…

As Halloween approaches, it’s not just ghosts and ghouls that are causing fear – financial markets are also giving us plenty of reasons to be spooked. From crumbling consumer confidence to rising debt burdens, the economic landscape is littered with eerie signs of instability. In this year’s roundup, we explore five charts that reveal unsettling trends in global markets.
Happy Halloween!

With the US Treasury curve yielding above 4%, high yield (HY) bonds still offer mid-single digit yields. As of the end of September, US high yield, European high yield and emerging markets (EM) corporate high yield bonds were offering 7.0%, 6.1% and 7.4% respectively. Credit spreads, however, have plummeted to multi-year lows and the eternal debate between all-in yield vs credit spreads continues. Credit spreads matter because, at an index level, they need to overcompensate for future defaults. Otherwise, there would be no reason to…

In January 2024, the African Development Bank (AfDB) issued the first hybrid capital instrument ever issued by a Multilateral Development Bank (MDB). Despite initial hopes that this would be the first of several such instruments, allowing MDBs to leverage private capital to support development projects globally, this remains the only such bond in existence. Why has this market failed to grow? Is this instrument really suitable for MDBs? And does it have a natural investor base?

What does a 1990s hip-hop artist from Brooklyn, and an oil-rich South American country have in common? Surprisingly, a shared struggle. Jay-Z famously faced 99 problems, while Venezuela’s was one, much larger, issue: Nicolás Maduro
Their career paths were equally unconventional. Jay-Z transitioned from a high school dropout to a global hip-hop icon whilst Nicolás Maduro journeyed from a bus driver to the President of Venezuela. By comparison, it makes my not-so-meteoric rise from a university bartender to an investment specialist seem relatively spiritless.

In recent years, the transmission mechanism of monetary policy—the intricate process through which central bank actions impact the economy—has undergone significant changes, notably as global debt levels have surged. With governments around the world carrying heavier debt burdens, the impact of rising interest rates on the economy has shifted in ways that policymakers must grapple with.