Perspectives Blog

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

We have started to reduce exposure to high-quality bonds with limited upside potential and high-yield bonds in which credit risk appears too aggressive. Following weakness last year, emerging market debt has posted gains this year, and we expect further strength ahead as volatility subsides. While we expect a flatter yield curve over the next few months as investors focus on the timing and pace of rate increases, we don’t think they should avoi…

Comments on the effect on global markets from the Ukraine crisis

Mark Burgess, Chief Investment Officer, Threadneedle Investments | March 12, 2014

To date, the fallout from the Ukrainian crisis has been largely confined to the emerging market debt, emerging market equity and commodity markets. At current levels, emerging market local currency debt appears to offer value, although we expect both the hard and local currency markets to remain volatile in the short term. Emerging equities reflect concerns not only around Russia and Ukraine but also the weaker growth outlook in Brazil and China…

The beginnings of a new moderation in Asia

Soo Nam Ng, Head of Asian Equities | June 2, 2014

…China under the Xi Jinping leadership. Post the GFC, the Hu-Wen leadership in China rolled out aggressive and hastily implemented fiscal measures in a bid to prevent a sharp slowdown. Low return projects and local government debt issues followed, including the LGFV(2) issues that have been touted as a potential non-performing loan problem for the banks. Policymakers did manage to keep growth above 9% until 2011 (Exhibit 1), but sustainability wa…

How bad is China’s credit crisis?

Weili Jasmine Huang, Senior Portfolio Manager | February 3, 2014

…only about 7% of total banking sector assets. Another shadow banking product is wealth management products issued by banks at Rmb10trn, less than 10% of bank’s total deposit base. • China has only 10% of gross external debt of gross domestic product (GDP), almost the smallest among all emerging countries. That means debts are largely domestically funded, and by adding in all forms of non-loan and off-balance sheet credit, the resulting ban…

Gut check: The outlook on fixed income

Colin J. Lundgren, CFA, Head of U.S. Fixed Income | February 24, 2014

…or performance can be explained as payback (reversal of strong inflows when the sector was in favor), concerns about tapering, China slowing and deteriorating growth prospects more broadly in EM countries. Countries in the EM debt market that suffered the most last year were those that ran large current account deficits and faced potential funding challenges when the Fed tapered (i.e., the so-called “Fragile Five” countries of India, Indonesia, T…

The importance of taking a long-term perspective

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | February 3, 2014

…U.S. Aggregate Bond Index is a market value-weighted index that tracks the daily price, coupon, pay-downs, and total return performance of fixed-rate, publicly placed, dollar-denominated, and non-convertible investment grade debt issues with at least $250 million par amount outstanding and with at least one year to final maturity. The Barclays U.S. Corporate Investment Grade Index is an unmanaged index consisting of publicly issued U.S. Corporat…

The Fed’s decision tree

Zach Pandl, Portfolio Manager and Strategist | October 8, 2013

…t be known for certain, but estimates from economists suggest a drag of about 0.25%-0.50% on annualized fourth quarter gross domestic product (GDP) for every two weeks the federal government remains closed. Needless to say, a debt ceiling crisis could have much more worrisome impacts on the economy if it leads to a missed payment on the government’s debt. If the standoff continues beyond this week it will likely increasingly cloud the U.S. econom…