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Une année 2018 difficile mais porteuse d'opportunités sur le crédit 
Dernier hebdo de l'année qui se termine sur une note plutôt maussade pour bon nombre de gérants obligataires, quelle que soit leur spécialité ou leur positionnement. Seuls quelques héros ou quelques chanceux, à l'appréciation de chacun, auront réussi à préserver une performance positive dans un marché globalement baissier et émaillé d’accidents capables de pénaliser bon nombre de portefeuilles plus que de raison :  Les accidents sur les corporates comme ...
Read more  17/12/2018
Doit-on s'inquiéter de la courbe inversée aux USA ? 
Alors que le calendrier de l’avent s’égrène, ce n’est probablement pas en 2018 que les gérants obligataires profiteront du fameux rallye de fin d’année… Chaque semaine, la baisse accélère et touche indifféremment toutes les catégories obligataires, hormis, comme d’accoutumée, les titres souverains happés par la BCE et représentant encore le fameux « safe heaven » pour les investisseurs… Cette semaine, nous noterons notamment la chute de -0,6 % de ...
Read more  10/12/2018
De l’inquiétude à la résignation … (ou la patience ?) 
Alors que les chutes de valorisation d’octobre inquiétaient les gérants obligataires qui voyaient leurs performances sombrer dans le territoire négatif, la poursuite du mouvement ces derniers jours les a confinés dans la lassitude et la résignation.   Quelle allocation choisir quand tous les actifs sur lesquels vous pouvez vous positionner chutent ? Quelle justification apporter quand les mouvements de marché ne reflètent aucune réalité économique ou financière mais seulement ...
Read more  03/12/2018
Une fin d'année à l'abri... 
Nouvelle semaine difficile pour les gérants obligataires avec des performances négatives quelles que soient les catégories choisies : haut rendement ou investment grade, financières ou corporates... Seuls les souverains, encore une fois, probablement parce que les régulateurs et la Banque Centrale ont tout fait pour drainer l'épargne européenne vers leurs obligations depuis près d’une décennie, offrent encore à leurs détenteurs un rapport performance/volatilité hors norme...   
Read more  26/11/2018
Le black friday obligataire a-t-il déjà commencé ? 
Alors que la fin d’année approche, perplexité et inquiétude sont les deux sentiments qui animent bon nombre de gérants obligataires, tant les marchés semblent répondre à des logiques qui n’en sont pas tout à fait unes… L’Italie se stabilise au milieu du gué sans refléter ni son risque intrinsèque ni le soutien implicite de l’Eurozone, les publications trimestrielles des corporates prennent des proportions dramatiques, certains corporates s’écartent chaque jour sans que ...
Read more  19/11/2018
Italian budget process may provide a buying opportunity  
While the final phase of negotiations between Italy and its European partners approaches, with the coming week likely to bring some news on that front, the markets appear to await the battle calmly. Credit spreads largely stabilized last week, after peaking in October. This may be due to the fact that the main sources of volatility, hedge funds and investment banks, have begun to gradually close their books and are expected to limit their bets between now and year-end to lock in performance. In any event, they only have access to 30% of outstanding Italian debt, with the remainder held by ...
Read more  12/11/2018
Dia, Steinhoff, Rallye: coincidence or a sign of things to come?  
Last week, bonds played their role of shock absorber, posting flat returns which, while not offsetting the equity implosion, at least limited portfolio volatility and enabled money managers to hold on to their riskiest positions.  However, the idea of bonds as a protective safe space is a mirage, as only a few issuers posted positive returns, i.e., those which have been in demand for years whenever a flight to quality was called for. These are, of course, Germany and the other core European sovereign issuers, which gained 0.52% for the week. Beyond that, performance was less ...
Read more  29/10/2018
Italy is not a bad choice at the moment  
With the Italian crisis raging on last week, it is important to reflect on a few basic concepts and to distinguish between the different short-term flows: market flows, information flows, capital flows (into and out of funds), flows of contradictory opinions, and nervous flows which impact all fund managers whose portfolios have undoubtably suffered due to the extreme volatility of the past few days. There are so many flows to consider that it can be easy to forget investment fundamentals, which can make yesterday’s decisions suddenly obsolete and cause investors to ...
Read more  22/10/2018
Flight to quality conspicuously absent 
In our last weekly note, we described the cracks which have been appearing in the market for some months, particularly in the US, and companies’ making massive equity buy backs. Based on empirical evidence, we concluded that a crisis in some major asset class would lead to a flight to quality.   But last week stocks slumped significantly, bond spreads widened considerably, and yet there was no sign of a flight to quality episode beyond the usual scramble for the German Bund. In France, the CAC 40, along with other stock markets, lost almost 5% over the week, while ...
Read more  15/10/2018
Market’s focus switches from Italy to the US 
Last week, Italy offered European markets a break from the fear that it instilled the previous week, as the government took some time to reflect and consider how it might satisfy its stimulative policy whims at the same time as it meets the demands of its European partners. Let’s not fool ourselves, the soap opera is far from over, and while we still consider that Italian bonds provide a great opportunity in a market with generally low interest rates, it will come at the price of weeks or months of portfolio volatility. It is indeed difficult to pick the bottom, so we prefer to tread ...
Read more  08/10/2018
Italy will be decisive for 3Q bond performances 
In the last few weeks, the fixed income markets seem to have regained some optimism, visible through spread tightening, an active primary market, relatively low premiums, a reduced interest in the safe-haven German Bund, and tighter peripheral spreads, led by Italy. Consequently, fund managers saw their performance improve as the fixed income universe returned to the favourable conditions they had gotten used to during the last few years, but had to do without in the last few, more challenging, months. Their good cheer even prompted the use of terms like inflation, an accelerated exit from ...
Read more  01/10/2018
How to anticipate and make the most of financial crises... 
Despite fixed income managers’ concerns about their performance, and especially deteriorating Sharpe ratios (performance/volatility), it has been business as usual during the first half of September: oversubscribed primary issues, an array of asset allocation presentations merely showing an overall consensus based on forward yield curves regardless of the underlying asset, and many as yet unanswered questions, the answers to which are unlikely to impact portfolio decisions anyway.   As the financial universe ventures further into ...
Read more  17/09/2018
Keys to success in 2H2018 
There were few major events last week in the credit markets, as participants brandished their keyboards and mice and searched their screens in attempts to find the best angle of attack to make it through a year which continues to be volatile and has led to negative returns for many.   Quarterly reporting season is coming to an end and the primary market is lackluster – the only issuers coming to the market are blue chips offering almost no premium or very low absolute levels of premium. Core sovereign yields continue to fluctuate according to the amount of ...
Read more  10/09/2018
Summer slow-down fuels anticipation 
The first Monday following the end of vacation season is an opportunity to recap the summer that was for portfolio managers: lacking both a major correction and the satisfaction that comes from a rally. Many had the unpleasant feeling that each market contraction, every little corporate development, every incidence of low liquidity, every ill-timed statement by one government or another, and every weak economic statistic, represented a material risk to their, often negative, year-to-date performance.  This is another argument in favour of being patient and maintaining low portfolio ...
Read more  03/09/2018
Vacation traffic jams have begun to impact the bond market 
Even though the end of the 2nd quarter turned out to be complicated for bond portfolio managers, with almost no winning trades except the bund, for about a month, they approach the summer and quarterly earnings season with relative serenity.
Read more  16/07/2018
Germany’s football team may have been eliminated, but the country continues to put in the best bond performances on the eurozone 
With the first half of the year now behind us and July holiday goers already preparing their bags, this seems like a good time to do a wrap-up of what was a hectic and complicated first six months on credit markets. Far from us to take advantage of these sunny days to lounge round a swimming pool (obviously, with a giant TV screen nearby to root for our football team). On the other hand, there is nothing better than a graph to get a clear and quick picture of bond performances for the half year. We will follow with a brief analysis of the graph to explain our viewpoint on the ...
Read more  02/07/2018
Investors stuck between cold war and zombies 
As we approach mid-year, escalating global tensions are, slowly but surely, starting to impact the financial markets, with the bond and credit markets already suffering for a few months, but the equity markets as yet unaffected. Bond spreads are widening across the board, bumps on the road are increasing in number and the majority of indexes and funds have slipped into negative territory. In 2015, the credit markets showed the first signs of what was to become the stock market crash in early 2016, before recovering spectacularly during the second half of that year (2015). So we have to ...
Read more  25/06/2018
Old sins have long shadows (Italian proverb) 
Last week we suggested that the markets were somewhat uncompromising with respect to the Italian crisis and considered the arrival of Mr. Conte to power somewhat carelessly. But, it took only a weekend and two public statements for investor fears to be stoked and for Italian yields to head back towards recent highs. We reiterate our opinion from last week: although the Italian crisis may not end happily, it will end, though probably not for several months. The situation will likely turn out in a similar way to the Greek crisis, where Mr. Tsipras and Mr. Varoufakis caused an uproar, ...
Read more  11/06/2018
Investors wonder whether the Italian crisis was just a flash in the pan 
Last week was probably the worst since the volatility spikes of 2016, linked to commodity prices and their impact on mining and energy issuers, as well as high yield indices. This time, the storm was not provoked by corporates, which for the moment are sticking to their budgets, but rather by sovereigns, as was the case in 2011-2012 with the peripherals, in 2014-2015 with Greece and in 2016 with Brexit! As Europeans, we have a tendency to focus on International risks: US stock markets and high corporate leverage, emerging markets with their elevated debt levels and exposure ...
Read more  04/06/2018
Markets question whether Italy will spark the next debt crisis 
As usual, it wasn’t a single predictable spark which set the market off, rather the highly improbable scenario of three of them igniting simultaneously. Proof once again that probability models have little success in finance and that the markets may consider certain events trivial one day and significant another, depending on their moods. Three political events unfolded thusly in the past 10 days, worrying the financial markets and the bond market in particular: cancellation of the meeting between North Korea and Mr. Trump, an uproar over a probable system of corruption in ...
Read more  28/05/2018
Continued and growing signs of market angst 
Although rates remain low overall, bond market performance clearly shows that the trend is up and so now a bond manager’s primary task is to prevent the loss of their clients’ capital by avoiding potentially painful bumps in the road. Last week, several bond issuers gave the market a scare and left certain players black and blue, for completely idiosyncratic reasons. Nevertheless, these events added to the market’s worries and enhanced fear of a major impending bond market correction. Market restlessness was clear in the case of Air France, talk of which ...
Read more  14/05/2018
The markets have become “uncool”, which is a good thing 
The complaints heard over the last few months, about the credit market’s being lacklustre and sluggish, perhaps missed the point that such is inherent and key to the bond universe. Companies without difficulties, by obediently paying coupons and redeeming debt, show their cautious financial policies, and well-thought through, sensible business plans. But in the last couple of years, financial markets have turned their attention to businesses and products showing exactly the opposite behaviour or features, as investors sought higher returns and were perhaps overly keen on ambitious, ...
Read more  07/05/2018
A week which showed us what it will be like when rates finally begin to rise 
The credit markets improved along with the weather last week, led by high risk, high yield categories, and subordinated financials, while sovereign yields logically widened. As a result, we witnessed significant differences in portfolio performance based on positioning, which proved once again that the bond market universe is far from homogenous and that the numerous articles asking the simplest question about increasing interest rates, perhaps did not ask the right one. For the week, the Iboxx € Overall index lost 0.30% while the Iboxx € High yield index was flat at -0.03%. ...
Read more  23/04/2018
After cautious optimism, worry and patience, comes fatigue... 
The second quarter has begun with the financial markets posting near-zero returns for all asset classes but at the cost of volatility. The mood of asset managers seems to change regularly: 1/ relative confidence at the beginning of the year, fed by the feeling of many players that they were cautiously positioned, 2/ doubt at the end of January due to unusually sharp spikes in volatility and losses of between 2 and 10% in bond and stock portfolios, 3/ patience since mid-February, necessitated by a complete absence of a trend and growing uncertainty on the economy and geopolitics, 4/ the ...
Read more  16/04/2018
Trade war: the new worry for financial markets 
It was a tough week for risky assets, which, since January, have not been able to find a catalyst leading to a return to the path of positive performance, as the worries accumulate, often on the political side. As equity indices declined sharply in recent days, with the CAC sliding -3.5% and the S&P 500 falling -6.5%, the flight-to-quality impacted the bond indices, which posted weekly performance inversely proportionate to their corporate bond weightings: the iboxx euro sovereign bond index increased by +0.5%, the iboxx corporate slid by -0.17% and the iboxx High Yield decreased by ...
Read more  26/03/2018
Growing dichotomy between issuers may signal future credit market upheaval 
Politicians and central bankers continue to try to spark recoveries in their respective regions while trying to avoid high visibility currency and trade wars and in doing so create instability in the financial markets. The markets are already perturbed by the approaching end to QE, while companies are anxious to have one last shot at excessively low interest rates to protect themselves from the fact that growth is still weak, uncertain and unevenly distributed. Monday: Eon announced that it will purchase RWE’s Innogy network for more than €20bn. Tuesday: ACS and ...
Read more  19/03/2018
Teva and Casino/Rallye all benefited from the financial market’s blind hunger for yield 
Last week, the only constants in an otherwise trendless credit market, were money manager uncertainty and volatility in rates, with a notable tendency toward spread widening: 1/ In the high yield market for many months, if not years, a buy-and-hold strategy worked due to continual spread tightening, driven by the quest for rapidly shrinking yields. However, for a few weeks now we have seen significant reaction to certain earnings releases. Good news such as reduced debt or improved cash generation has done little to narrow the already anemic spreads, while the slightest ...
Read more  12/03/2018
Recent bond market shocks are just the beginning for rates and spreads 
In recent days, European fund managers in Geneva, London, Paris and even Monaco have had to deal with not only Siberian cold, but also a new wave of searing volatility which took hold of their portfolios. The Italian election and the uncertainty surrounding Angela Merkel’s bid to form a coalition with the SPD did not seem to be the cause of the end-of-week market jitters. Rather, portfolio managers were much more sensitive to the ambiguous words of new Fed chair Powell and to the unambiguous words of President Trump. So far in 2018, company earnings have been relatively solid, ...
Read more  05/03/2018
Thirteen years later – another TDC Telecom LBO 
As has been the case of late, financial markets were very volatile last week. We would note once again that analysts who predicted, for the umpteenth time, that interest rates would increase in conjunction with stock prices, were again mistaken. From a strictly theoretical point of view, we understand the paradigm: rates rise as growth, inflation, profits and therefore stocks, forge ahead. And, each day there is proof that excess stress in all asset classes, in addition to volatility, when it appears, sparks a landslide and with it, correlation.  Out with the models, which work ...
Read more  19/02/2018
Another warning and the first signs of fallout 
Last week we got another taste of what we might expect to play out in 2018 - trend reversals. Although we are not trend-chasers who systematically buy today that which went up yesterday, trends are very much a reality in the stock market and it is important to follow them to avoid going against them for too long and losing a lot of money. One example of this is the multiple real return funds launched a decade ago, which systematically positioned themselves against the falling rate trend, arguing that rates were too low and could only go higher. Only now are they beginning to be onside, too ...
Read more  12/02/2018
January sets the trend for 2018 
Albeit just the first month of the year, we believe it to be of interest to review the performances and trends, as these would appear to be relevant for the rest of 2018. Although inflation would still seem far off given the liquidity injected into the financial system in the last 10 years, unemployment rates, economic growth and confidence have responded favourably to stimulus measures adopted by central banks across the globe. That sums it up for the LT and fundamental reasons behind the current trends. In terms of ST and technical factors/signs, we note that in January research and ...
Read more  05/02/2018
Markets may be too optimistic about eurozone QE tapering 
Yet again, last week, the macro-economy and international financial flows were in the limelight, rather than businesses, which are the midst of earnings reporting.   In terms of the macro-economy, the €uro/USD parity flirted with an exchange rate of USD1.25/€1. This came as a surprise as it was not generally believed by strategists that it would be reached until the end of the year after the ECB had stated its plans for gradually “tapering” the QE programme. As so often, the market clearly interpreted Mario Draghi’s words very optimistically. ...
Read more  29/01/2018
Caution and optimism may not be able to replace the panic/euphoria duo on the financial markets 
The first weeks of 2018 have shown that, albeit useful as a signpost for accountants and statisticians, the calendar year has no particular relevance when it comes to market sentiment or financial activity. At end 2017, the markets were dominated by a strange kind of optimism – strange in that, as premiums have melted, there is a high risk of an interest rate spike and higher volatility, fund managers adopted a cautious stance and highly selective investment approach. There is the possibility of increases because all these elements are lower than they have ever been. And yet, when we ...
Read more  22/01/2018
The year start dominated by regulatory requirements 
In 2017, most fund managers saw relatively favourable performances. But at the start of 2018, against a backdrop of general optimism about global economic growth, their attention turned almost exclusively to MiFID II and other compliance issues. We welcome this calm, as not a day goes by without a counterparty or investor asking for some document or report, whether for MiFID II, the PRIIPS regulation or Solvency II. And although regulators have slapped each other on the back as the 3 January deadline passed without, they thought, any major glitches, the market realises that it is ...
Read more  15/01/2018
Impending resolution of the Steinhoff saga and year-end preparations 
As we prepare for the holiday festivities, with many market participants having effectively closed their books for the year, we write the final weekly of 2017. We would like to take this opportunity to thank our readers, both regular and occasional, and to invite you to the presentation of our Outlook and Asset Allocation for 2018. The presentation will take place in our offices on 10 January 2018, at 08:30. For most, this pre-Christmas week will be uneventful. This is not the case for Steinhoff. The company’s bankers and largest creditors will decide its fate, at least for ...
Read more  18/12/2017
2017 has been a troubled year for mass retail and the trend continues, with Steinhoff 
This year started with the collapse of Agrokor, a blue chip on the HY market in Europe. It is set to end with the decline of Steinhoff, another blue chip, but on the convertibles bonds market.   There is some hope that Steinhoff will not fall into the same pit as Agrokor did, but will manage to turn things around as did Valeant. The company recovered after a similar series of accounting scandals in 2014, via reshuffling management and completely overhauling the strategic roadmap. But, for now, we have no idea of the outcome as no one, not even senior management, has any ...
Read more  11/12/2017
Virtual reality comes to finance in the latest phenomenon since politicians and holograms 
  Whilst traditional financial players, burned by November’s volatility, prefer to wait patiently for year-end, all the while protecting their returns, other “investors” are placing their bets on the headline-grabbing, new virtual asset: bitcoin. This week, the cryptocurrency hit new highs, bringing its year-to-date appreciation to almost 1,000%.   Surprising though it may be that traditional capitalists, who make up the latest market participants, have thrown in their lot with the original, self-professed anarchist bitcoin promoters, even ...
Read more  05/12/2017
Liquidity galore gazumped by November’s market correction 
Last week, the November flurries turned out to be a false alarm, as purchasing flows focused on securities sanctioned earlier in the month. We note that the mid-month spread widening on the credit markets merely served to correct the excessive euphoria coming hot on the heels of Mario Draghi’s end of October speech which was as accommodating as it was devoid of surprises. During the next two weeks, the credit market was bullish whereas yields were rock bottom and spreads very narrow.  Just for once, operators backed down opting to keep their heads as, at 2%, the yield on ...
Read more  27/11/2017
Patience on high yield 
For months, the credit markets have seen bond spread narrowing, but last week we witnessed the second week of tension as the prices of junk bonds collapsed. Albeit too early to take advantage of the trend, it could provide ample investment opportunity. In our view, the prices of such bonds are falling owing to three factors.   1/ In terms of investors: as the year draws to a close and managers have notched up high (and unexpected) performances in HY, fund managers naturally want to rake in profits and secure their positions. In consequence, they sell off ...
Read more  20/11/2017
A simple tremor due to year-end arbitrages or the start of a credit repricing? 
We have been waiting for months for the credit markets to wake up and assign a significant risk premium to issuers, especially in the high yield segment. Last week, that moment may have arrived.  In the last two days of the week, the Iboxx € High Yield index lost 0.65% and the Iboxx € Corporate fell 0.45%. These are significant losses given the current level of yields.   As is often the case, almost by definition, it was not the risks that the market has long anticipated which may have unleashed a new period of stress in the credit market. The risks ...
Read more  13/11/2017
Mario Draghi fighting a losing battle against numerous political crises 
The ECB’s meeting was the highlight of last week’s news, particularly as Mario Draghi announced plans to cut the monthly purchase programme by half, from €60bn to €30bn. And, as we know, the ECB’s movements act as major catalysts for the financial markets. Last week, the stock market closed at a level not seen since July. Even so, we consider the announcement to be a non-event as the ECB chief said that he would continue the purchase programme for some years to come, that is, there is no change in the intrinsic policy.   In our view, there are ...
Read more  30/10/2017
Investors have given up and are investing, despite low interest rates 
In the last few weeks, we have often referred to the fact that fund managers have been building up high shares of cash in their overall assets owing to the lack of opportunities on the market and fears of a downturn (as well as to be in a position to take up any such opportunities when they occurred!). Corporate issuers were the first to benefit from this situation: every time they issued bonds, investor demand largely surpassed their funding requirements so that they were able to reduce the yields and sometimes even choose their creditors from the investors. Two primary bond ...
Read more  23/10/2017
Investors oscillate between circumspection and seeking out returns 
Another relatively calm week for the credit markets, who look back with nostalgia at all the once-a-decade crises triggered in October (1987, 1997, 2007) … but not this year. As a result of the crisis in 2007, regulators completely restructured the banking sector and implemented a regulation of such magnitude that it would be 10 years before it was fully in force. Drawing, however, on Greg Ip’s comparison in a 2015 issue of the Wall Street Journal, if we drive the risk out of one sector, it will probably blow up in another sector, as if we had exerted heavy pressure on ...
Read more  16/10/2017
Catalonia, the latest political hot spot in Europe 
The start of 2017 was clouded by uncertainty (referendum in Italy, French presidential elections) but as the year has worn on, the political risk has subsided. Europe has sailed into relatively calm waters, with peripheral bond spread narrowing, the German Bund slightly recovering, and high-risk assets rallying. Concern in European countries has shifted. Until recently Italy, France and Germany have given rise to concern whereas Spain appeared to be faring relatively well. In Italy, there was political tension, with the rise of Eurosceptic political parties and in France, concern ...
Read more  09/10/2017
Retail giants will have to change their business models … but even so, may not survive 
As the third quarter comes to an end, calm still reigns on the financial markets … in all regions and across all types of assets. For example, we note that on the equity markets (easier to quantify than fixed income) in France, only 1% of trading days saw the CAC 40 close up or down by over 2%. The average since the index was created in 1988 is 11%. The US was in the same boat. The Dow Jones has slowly and gently climbed from one record to another. In fact, it has notched up 42 this year with volatility at record lows. Not since the early sixties during the economic boom ...
Read more  25/09/2017
All quiet on the financial markets but a build-up of manoeuvres in asset management 
Unfazed by North Korea’s increasingly vehement provocations, the financial markets were exceptionally calm last week. In the most recent words of the Korea Asia-Pacific Peace Committee, the “four islands of the archipelago should be sunken into the sea by the nuclear bomb of Juche. […] Japan is no longer needed to exist near us […] Let’s reduce the U.S. mainland into ashes and darkness.” If a committee for peace takes such an aggressive stance, we hate to think what the Ministry of Defence has to say. Nonetheless, financial markets continue ...
Read more  18/09/2017
Primary bond market teeming with activity, but not enticing  
As always in September, the abundance of issues on the primary bond market dominated market talk last week. But there were few attractive opportunities and even those were highly-priced. Some such examples follow: -          on Monday, Icade (BBB+) issued a 10-year “green bond” with a yield of 1.59%, cutting further the already-low coupon rate. -         on Tuesday, Valeo (BBB) issued a 5-year bond with a yield of 0.39%, and GlaxoSmithKline issued a 3-year bond with a yield ...
Read more  11/09/2017
Bonds are likely to hold firm, but stay away from sovereigns 
Financial markets are not paying much attention to the escalation of tension in North Korea as, albeit a heavyweight in terms of its potential destructive force, it is a lightweight in the financial world. The first week in September is likely to set the tone for the rest of the year, particularly for fixed income markets. Firstly, we note that the ECB is expected to announce an extension of the quantitative easing on Thursday as Mr Draghi is unlikely to want to maintain a high euro, thereby sustaining euphoria (we are thinking of 2015). He is expected to extend it for another 6-12 ...
Read more  04/09/2017
The summer for bonds and potential threats  
Last week, with interest rates still on the rise, bond indices continued their downward trend. The 10year German Bund provided a yield of 0.57%, the highest since early 2016. The Fed has begun to raise interest rates and the ECB chief has made some abstruse comments about reducing the QE programme. So, now investors are beginning to think that interest rates are likely to begin to stabilise driven by slight hints of an economic recovery and more stable commodity prices (oil, in the lead).  Albeit less violent than the mid-2015 interest rate hike, which drove the 10-year German yield ...
Read more  10/07/2017
Prudence and patience for a calm summer  
Whereas the first half of the year was coming to an end under favourable aegis in terms of bond performances, last week took a bite out of some performances and almost wiped out others.    Once again, the features which triggered the excess volatility were related more to macro-economic balances, the central banks, hence, to interest rates than to credit which is still sound in relative terms. Those holding massive liquidities still seek to invest them as soon as they see the possibility of high levels of yield.    Since figures often provide ...
Read more  03/07/2017
The Italian government provides funds of €1.5mn per employee ... 
This morning, a new chapter in the rescue of European banks unrolled with the Venice-based banks Banca Popolare di Vicenza and Veneto Banca indicating that not much has changed in Italy, despite the institutional and regulatory reforms imposed by the European Union.
Read more  26/06/2017
He who feeds on waiting may die of hunger ... 
Although we are heading into the summer break period, bond markets are still rising, given the impression that the buy-and-hold strategies are viable. So, investors are able to make some gain on the high quantities of cash injected into the system by the ECB in the last two years. So far, the bank bail-in mechanism has circumvented bank crises by making creditors pay. We had one such further example last week with Spain’s Banco Popular. Political events give cause for concern but the ECB’s QE rapidly dispels them. Businesses in Europe have high amounts of cash but have ...
Read more  19/06/2017
Be wary of bank “equidebt”  
While this week may have appeared mostly calm, the ECB promised low rates for a (very) long time to come, thereby giving the market all the justification that it needed to purchase overvalued assets. Meanwhile, we watched the first rescue of a European bank using the bail-in mechanism – Spain’s Banco Popular.    This was the first rescue of its type carried out by the ECB, which is responsible for supervising this resolution mechanism and, for the moment, it seems to have worked as intended. Judged to be bankrupt or almost bankrupt by the European ...
Read more  12/06/2017
Brazil discreetly guides China into the limelight …  
Whereas investors appear to have noted the situation in Brazil, considering that the corruption allegations against the new president Michel Temer are nothing new, financial markets, both equity and credit have become moderately optimistic once more. It is true to say that the ECB continues to shore them up, with its massive liquidities still waiting for investors.   Central banks have quietly pursued previous policies but they hope that eventually the markets will begin to act without relying on their cash, listening to their speeches and following their line of ...
Read more  29/05/2017
Patience and flexibility, two vital qualities in the next few months … 
Last week was a reminder to bond investors that the market was forming only a balloon as the central banks are preventing any huge bubble. But even this balloon will cause painful upheavals. Bonds across the board (including HY) no longer benefit from the traditional buffer previously provided by sovereign bonds but no longer. Without a safety net, falls are always more painful … as everyone knows.   Here are a few examples of gross yields: Nokia February 2019 (BB+): -0.10% LVMH November 2020 (A+): 0.10% Ford February ...
Read more  22/05/2017
Higher long rates not yet in the works  
Although we remain nowhere close to the alignment of the planets that we last saw at the beginning of 2015, it would appear that post the French election, the financial markets are inclined to take an optimistic view. On one hand, one of Europe’s founders has just managed to resist the temptation of euroskepticism, which should allow for a certain level of political stability for several more years.  On the other hand many companies are releasing high quality financial results and revising guidance upward, a phenomenon that has not happened since 2010. European stocks were ...
Read more  15/05/2017
Is the end of political uncertainty really a catalyst? 
Almost 9 months of political uncertainty preceded the Presidential elections in France, driving asset managers to adopt the popular strategy of maintaining large cash weightings, combined with occasional short term trades in place of longer term positions. In the recent past, when the political dangers forecast actually materialised, they had little impact on the market given the high cash holdings in portfolios and in the financial system (mostly due to the ECB). We wonder what consequences the French vote will have in the light of the fact that it, alone, has gone in the markets’ ...
Read more  09/05/2017
France buys time, the markets are reassured…  
From a financial markets standpoint, France seems to have avoided the worst case scenario. The problem has not been resolved, but the country has bought itself a few more years of slipstreaming behind Germany and the ability to benefit from near-zero interest rates. And, although the second round of the election is yet to come, it is extremely improbable that France will end up with a euro-sceptic, populist government. This was not so clear on Friday.   Although the long term situation has not changed and France remains in a stalemate with respect to the reforms ...
Read more  24/04/2017
The main risks from the French election 
Although the reporting season brought few surprises and bond spreads remain tight due to regulation, quantitative easing and the prudence of most market participants (indeed, it is well worth asking whether it is wise to invest at 1.40%, the average BBB yield, for 10 years), it is time for portfolios to be protected against the electoral risks which they face, particularly in France. After the recent votes (Brexit, Trump, Italian referendum), portfolio managers have become accustomed to seeing negative outcomes with no impact on the markets. But they would do well to beware of the ...
Read more  10/04/2017
Loxam pulls off financing, Agrokor dives into deep waters 
Only two days ago we would have provided you with a weekly commentary full of renewed hope resulting from actual positive political and financial progress. It would have allayed all fears, indicating that central banks were playing a supporting role to economic policies rather than being the last line of defence against a global crisis. That weekly commentary would have persuaded you that politicians had the situation in hand. It would have featured ...
Read more  03/04/2017
“Today, both the largest and the smallest bankers make use of tricks in the slightest of things”, Honoré de Balzac [unofficial translation] 
For weeks now we have seen directionless trading as the markets await the outcome of European elections and a definitive end to central banks’ easy monetary policy. The latter is certainly not going to happen anytime soon given that the numerous countries choking on debt need zero interest rates. So, we must turn to credit to find something new to talk about. In financials, French bank Credit Agricole decided on Friday against redeeming, at first call, one of its former generation deeply subordinated Tier 1 bonds paying a coupon of 6.637% (ISIN: USF22797FJ25), ...
Read more  20/03/2017
The first signs of divergence in eurozone bonds 
Last week’s lack of market drive was similar to what we experienced at the beginning of the year. Interest rates and stocks teeter-tottered back and forth, whilst market participants exhibited neither enthusiasm nor conviction. Cash was the only place where portfolio managers found common ground. Although interest rates at zero and spreads near historical lows (helped by the quest for yield premiums) certainly explain the lack of desire for traditional bonds, there may well be more complex reasons for this reticence. The world’s primary economic zones are currently at a ...
Read more  13/03/2017
Last Monday, the Wall Street Journal had a front page heading, “Europe’s periphery debt market welcomes new member: France” 
Last week we once again saw relative volatility in sovereign yields, particularly in France, where a flood of election polls caused significant changes in borrowing costs. No longer just tagging along with Germany, France is now in the spot light and its recent spread widening is just a foretaste of the dramatic shocks possible in the weeks to come. Although, so far, the situation is different from the peripheral spread widening in 2011/2012, it has relatively similar to 1/ the concern in Spain when the Podemos [We can] party was at the height of its popularity and ...
Read more  27/02/2017
Political risk provokes a “flight to corporate” 
As elections in Europe get closer (especially the one in France), the perceived risk associated with Euroscepticism, protectionism and extremism, mounts in the minds of investors. The immediate consequences are a tendency for investors to wait-and-see whilst maintaining high cash balances, and a sluggish primary market for all but the highest rated issuers. However, we are seeing a relatively new phenomenon: a flight to quality favouring corporates over sovereigns. Sovereign risk has done nothing but increase at various rates for decades, but had only been partially factored in by the ...
Read more  20/02/2017
Although 2017 looked as if it was going to be different from 2016, we are not so sure now 
We have only just finished the first month of 2017 and wide gaps have already appeared in bond spreads. Unlike what happened in 2016, now it is sovereign debt that has dragged down portfolio performance with largely negative performance (-2.23% for the Iboxx € Sovereign) whereas high yield bonds and subordinated financials have notched up a few basis points of positive performance (+0.67% for the Iboxx € High Yield). As always, when a new trend sets in, there is a flurry of taken-as-given explanations for the move, whereas there were many portfolios which were not well ...
Read more  06/02/2017
Rates rise, lending conditions become tougher 
This week we start off with a piece of bad news for candidates in the elections to take place in Europe: borrowing rates throughout the eurozone are rising. The 10-year German Bund is at 0.45%, the French treasury bond rate has just moved beyond 1% whereas the Portuguese sovereign is higher than 4%. As a result, bond indices,  ETF and other benchmark references have had a lacklustre beginning to the year. This was not the case for the equity markets or more flexible portfolios (mixed assets/multi-assets). In the year to date, the Iboxx € Overall has slipped 1.6%, the Iboxx ...
Read more  30/01/2017
An analysis of sovereign bonds calls for an analysis of their credit spreads  
Last week was confirmation that a goodly number of assets are beginning to run out of steam: sovereign bonds, stocks and commodities. In this toppish context, debt continues to perform well as investors are still seeing returns above and beyond buy-and-hold, which they equate with future bond performances. This behaviour weighs on corporate IG and HY yields. Contrary to the stance adopted by central bankers in Europe in the last few months, there is no rampant inflation in view, not much of a rebound in economic growth, little pick up in employment (especially in France), not much ...
Read more  23/01/2017
SLOWDOWN OF MARKET EXPECTATIONS AT THE DAWN OF THE CHINESE NEW YEAR 
After the collapse last month, the China bonds market stabilized but stayed cautious. Guohai Securities bonds trading default caused trust crisis towards non-banking financial institutions and worsened the liquidity situation before the year end, which was loosened by the net injections of PBoC in the end. The liquidity situation stayed moderate in January, but liquidity demand for crossing over Luna New Year still remains high.  The new issues in the primary market went almost frozen until the mid of January, with high demands on CDs. The bonds trading volume stayed low. 10Y Treasury ...
Read more  20/01/2017
Remember the risk on China! 
It was another trendless week in the financial markets as participants continued to reflect on potential strategies and the best way to maximize 2017 performance while various asset classes flirted with overvaluation. We saw little movement during the week, near normal bond market liquidity, a primary market where only banks and high quality corporates participated and little news from European corporates. Last year the Chinese market blew up starting on 4 January, engulfing Western markets in a post-New Year tornado which caused major declines, especially in HY ...
Read more  16/01/2017
Devils abound in the calmest rivers (non-official translation of Russian proverb - 1884) 
This year has begun in a much calmer way than the last! We’re certainly not complaining, but rather questioning whether the calm (read fanatical optimism), which began several months ago, is indeed justified. To answer this we need to consider what problems have been resolved, what solutions have been found, what catalysts remain for the equity and debt markets and, above all, what new problems have raised their ugly heads in the interim?   Problems resolved   Commodity producing corporates, which suffered greatly in early 2016, ...
Read more  09/01/2017
Heavy pressure on interest rates and credit, which could spread to early 2017 
China Bond Market almost collapsed in the past two weeks, which was triggered by PBoC’s measures to deleverage the market and aggravated by the Fed’s rates hike decision. 10Y Treasury went up 47 bps to 3.32%, with 1Y10Y spread narrowed to 28 bps. And 10Y policy bank bonds yield went up almost more than 70 bps to 3.86%, which was the level of two years ago. With USDCNY exchange rate under pressure to 6 years’ high 6.96, PBoC’s ...
Read more  21/12/2016
After nearly 10 years of an economic crisis, the next logical stage is political risk  
Unlike chocolate-makers, caterers and toy sellers, certain professions have begun to wind down for the year, including financiers. What makes this possible is that in 2016, performance turned out better than expected, though at the cost of high volatility and almost constant stress.   Firstly, let us not forget the stress on commodity producers. The Arcelor 2019 US dollar bond was trading at a yield of 17% in January 2016 and Glencore’s 2017 euro bond was at 9.5%. Now, these two yield 3% and 0% respectively.   Next up were financials with the ...
Read more  19/12/2016
The ECB ends the year with reassurance about 2017 
After the political woes of recent weeks in the US and Italy, the markets were hanging on news from their biggest ally, the ECB, to give them justification for optimism. But they must have forgotten that the ECB’s role is more that of a balancing force rather than a growth driver, that is, contrary to its peers in retail banking. Therefore, Mario Draghi would probably have adopted a more accommodating tone if operators had panicked, or become defiant. But given that the market was resilient, even optimistic, after the two votes, this was an irresistible opportunity to unleash the ...
Read more  12/12/2016
One, two … and three  
More or less as expected, the Italians voted ‘no’ to changing the Constitution, so no surprises on the political front, nor on the economic front, either. Still, maybe the financial year ending on 31 December will bring us some uncertainty and even a few problems.   Almost no one expected a yes vote in the Italian referendum, as instanced by the flood of sellers in the Italian banking sector and the spread widening experienced by Italian government bonds in the weeks prior to the referendum (the gap between 10-year Italian and Spanish government bonds widened ...
Read more  05/12/2016
The next Big Short could be in the eurozone! 
The next Big Short could be in the eurozone!   Given the upcoming political events in Europe, beginning with the Italian referendum in the period to year-end, the weeks seem increasingly long and investors are more inclined to ponder their performance than to take on new positions. Equity portfolio managers hope that the American post-Trump optimism will spread to their portfolios. Bond managers fret as they watch their performance filed down by (only) a few basis points each day due to rising yields and regular spread widening, especially in the banks ...
Read more  28/11/2016
Optimist or pessimist, patience is key… 
In the last few weeks, optimists and pessimists on the market have been sitting on their hands. This has not helped those tasked with commenting on the markets (operators, analysts) as they have watched the persistent lack of market dynamism and of significant events. Earnings reports are mostly as expected, as are mergers, given the colossal amounts of cash held by large corporates (cf AT&T’s likely purchase of Time Warner announced this weekend). Recent economic indicators have often been contradictory and with no discernible trend. Observers scan central bank announcements, as ...
Read more  24/10/2016
Weekly Update 07/06/2015 
As we write this weekly review, the majority in Greece have voted ‘no’. After 4 humiliating years of major economic slowdown (-25% GDP which is roughly the equivalent of the Great Depression in the US in the 1930s), it is understandable that part of the Greek population is not convinced by the argument of belonging to Ms. Merkel’s and Mr. Djisselbloem’s Eurozone.   So the ‘no’ has won and as we cannot provide a readymade solution in a completely ...
Read more  06/07/2015
Weekly Update 01 june 2015 
For weeks, there have been doubts, volatility and significant correction on the bond markets, but it would appear that these trends are almost over. Since mid-May, indices have climbed back after losing almost all the gains made at the beginning of the year:   The Iboxx Euro Overall index closed at +0.33%, that is +1% YTD with a high of +3.7% on 15 April, and the Iboxx sovereign index finished the week at +0.38%, that is +1.25% YTD with a high of +4.65%, also on 15 April.
Read more  01/06/2015
Weekly Update 18 May 2015 
No tranquil long weekends in May for fund managers, each week bringing its batch of volatility. Last week was no exception, with a significant drop in sovereign and business climate indices (most of which are linked to the sovereigns): - Iboxx € sovereign: -0.68%;       -Iboxx € Overall: -0.56%; - Iboxx € Corporates: -0.29%. Only the HY category stands out from the rest, as its credit component is particularly high at present because spreads widened markedly in 2H2014 and continued to register lacklustre performances in ...
Read more  18/05/2015
Weekly Update 4 May 2015 
Although last week, a short week, did not result in buoyant performances for the majority of bond portfolios, it contributed its share of lessons to be learnt during the first six months of this year:    Greece is giving in As do most politicians, Greek PremierAlexis Tsipras has begun his term by satisfying the masses amongst the electorate, even if this has meant delays in implementing his programmes and resolutions. By appointing a Minister of Finance capable of keeping up the show whilst standing up to the EU, the Greek Prime Minister ...
Read more  04/05/2015
Weekly Update 27 April 2015 
Generally, the season of the release of results lends fuel to the credit market, as it gives an idea about the outlook in the short- to-medium term for corporates or gives some idea about possible portfolio arbitrages. But 2015, already setting itself apart from others for various reasons, yet again is an exception to the rule. The markets are not particularly interested in results releases perhaps because they have not been the performance drivers in the last few months and are unlikely to be in the next few months. So, there are those who wonder what ...
Read more  27/04/2015
Weekly Update 20 April 2015  
Investors are perceptibly starting to tire of Greece, as demonstrated by the trends on the credit market last week. To date, the process was considered standard: elections of a new party in January; a tough start to negotiations; concessions on both sides followed by an agreement for less austerity; a potentially significant haircut on government bonds; and attempts to safeguard other sectors of the economy, in particular, the banking sector, as in 2012. All this to preserve the eurozone’s integrity, to avoid setting a precedent and send powerful ...
Read more  20/04/2015
Weekly Update 13 April 2015 
First quarter 2015 has come to an end, noteworthy for exceptional performances. Now market operators have two ways to go: whether or not to stay optimistic about the beginning of the year or whether to grab the gains in expectations of a marked downturn.  Numerous are those who point out that the accommodative policy adopted by the US in the last 6 years has led to market imbalances; now the eurozone and Japan have adopted similar policies creating further imbalances. Certainly, one tiny spark in Europe, or ...
Read more  13/04/2015
Weekly Update 16 March 2015 
Last week was the first week of quantitative easing in the eurozone. The ECB bought an average of three billion euros of bonds a day. As a number of analysts forecast, the prices at end February did not fully reflect the ECB’s massive operation since sovereign spreads have narrowed since then: the 10-year Bund slipped to below 0.2%, the French OAT to below 0.5%, and the Portuguese sovereign, to below 1.5%. Given the high amounts at stake, the few gains in volatility can be ...
Read more  16/03/2015
Weekly Update 9 March 2015 
Credit markets last week were not all they seemed. Whereas the most high risk bond assets continued to appreciate, high yields and Portugal in the lead, core assets spreads widened and, representing the majority of indices, brought the indices down: the Iboxx Euro Overall dipped 0.14%, in line with the Bund which slipped 0.19%; the Iboxx Euro corporate, whose spreads no longer manage to offset anything much lost 0.11% while the Iboxx High Yield inched up 0.16%, in the context of narrowing by almost all the issuers including the most high-risk.
Read more  09/03/2015
Weekly Update 2 March 2015 
As is well known, financial markets live in hope rather than focusing on reality. Last week was the last week for conjuring up hopes about the benefits to be gained before entering into the period of QE eurozone-style. And there is something new about 2015: it will not be split into two exact halves (which, of course, does not mean that this will always be the case). So, we think it is the moment to give a brief summary of the first part of the year: it was exceptional on the bond markets, particularly, fixed income. Happy are those sovereigns who have ...
Read more  02/03/2015
Weekly Update 23 February 2015 
More talks last week on Europe ... about Greece and Ukraine. But, despite the impression markets had a few days ago, the situation in Ukraine is not about to improve faster than in Greece.  Leaders had barely signed the truce fire, when the situation appears to be threatened again. At present it is difficult to envisage lasting peace between Russia and Ukraine, and Europe, in the near future. So, following the amended cease fire we have amended our point of view. Initially, we saw a clear distinction between ...
Read more  23/02/2015
Weekly Update 16 February 2015 
Last week, confidence gradually returned to the bond markets due to the talks taking place in Ukraine and Greece but not due to economic data. Indeed, operators have never paid so little attention to it because they have placed their destiny in the welcoming arms of the ECB’s QE, and are look forward to March to see the first effects.  Surprisingly, Ukraine showed us the first hints of an agreement. Whereas the situation had been deteriorating in the last few months, at the beginning of the week it ...
Read more  16/02/2015
Weekly Update 9 February 2015 
So far, this year, 2015, financiers are behind schedule by a few weeks ... as they considered ‘Christmas’ to be on QE day, 21 January. So, after some pre-Christmas shopping at the beginning of January, the delight at the ‘presents’ received and the hangover from too much ouzo at the end of the month ... they are now sitting down to make their appraisal of the situation.  We believe that bond prices have already factored in the effects expected from QE: the Euro at 1.13, share prices +9.8% ...
Read more  09/02/2015
Weekly Update 2 February 2015 
Although financial markets had a temporary burst of euphoria in reaction to the ECB head’s major announcement on 19 January which heralded a major change of tack in ‘old’ Europe’s monetary policy, they soon fell back. Last week, we witnessed the collapse of the equity markets (CAC -0.8%) and then the high yield (Iboxx HY -0.25%) so that peripheral spreads widened once more (Italy/Ireland, by 5bps, Portugal, by 25bps), the euro rose and confidence waned. There are two reasons for this flurry volatility, one event-related, the other ...
Read more  02/02/2015
Weekly Update 26 January 2015 
Financial markets in the eurozone had long awaited the events of last week. There are those who would say that they had been waiting over a year, that is, from the moment when the LTRO were depleted and deflation posed an ever greater threat. Others, more demanding, would say that the measures taken last week came five years too late! And that, given that the US adopted QE in 2009, we should have done the same. And that it may even be too late to escape deflation and the sluggish growth which are dragging the eurozone into a Japanese-style scenario.
Read more  26/01/2015
Weekly Update 19 January 2015 
The trend for the credit markets seemed to hesitate at the beginning of the year, before deciding where to go ... along the same tracks as at end 2014: - a significant narrowing of the spreads of all bonds in the eurozone, with the prospect of the widened scope of quantitative easing; - a slight narrowing of high yield spreads following the relatively excessive widening in 2H2014; - high primary issues by financials and sovereigns;
Read more  19/01/2015
Weekly Update 12 January 2015 
Last week, the first in the year, the credit markets warmed up with a relatively high level of volatility. Meetings on asset allocation took place, one after the other, as fund managers prepared to tackle what is likely to be a difficult year for different reasons. On the one hand, low-risk assets barely carry any remuneration and, on the other, high-risk assets, which normally do, may fail to do so in the next few months, as they could lose in value due to volatility (cf end 2014 on the high-yield assets) ... but not on ...
Read more  12/01/2015
Weekly Update 5 January 2015 
The year 2014 ended on tenterhooks. The funds, still in the black, waited with baited breath to make sure that that there would not be yet another reversal to wipe out their yearly performances, as was the case in August, October and (early) December. Those funds which did not manage to weather the storms of one of these three episodes, lasting up to two weeks, will attempt to convince their investors that the trends were merely ‘inconsistencies’ or market blips. There is uncertainty with no sure outcome.
Read more  05/01/2015
Weekly Update 22 December 2015 
This is our last weekly update in 2014 (before trying to come to a truce with the food and drink industry) before we allow our financial portfolios to have a well-deserved rest after months of shilly-shallying in step with the varying conflicts, central bank announcements and uncertain economic statistics. Although the previous week a number of fund managers witnessed their year’s performances evaporate into thin air in just a few days, last week they observed a brief accelerated end of year rally, with the CAC 40 ...
Read more  22/12/2014
Weekly Update 15 December 2014 
Usually, the month of December offers managers and other financial operators a few weeks of respite. But this does not look like being the case in 2014: rounding up a rough and troublesome year, the month could finish off some players.  Last week was particularly challenging on both the equities and the credit markets. A number of funds may well see their annual performances wiped out completely in just those few days and this, even if the year as a whole has been slightly positive: CAC, -7%; Iboxx High Yield, ...
Read more  15/12/2014
Weekly Update 8 December 2014 
As, this year, the ECB has proved to be the driving force behind the fixed income and credit markets, Mario Draghi’s comments, on 4 December 2014, marked the end of the year and heralded expectation for 2015, all in a relatively flat calm. He could not easily have announced some kind of change to close the year ... whether positive or negative, so he remained very cautious about what is to come. Obviously, he prefers to take his time to think, weighing up the effects of the unconventional measures taken, unprecedented, in Europe, rather than making ...
Read more  08/12/2014
Weekly update 1 December 2014 
The week was a little calmer than previous weeks, but we remain alert to the fact that volatility and lack of liquidity are in the offing and likely to emerge at any moment ... hanging around for some time to come. It was a week of recovery, during which all of the credit and bond indices appreciated. Once again, sovereign bonds are at the head of the race as the prospect of quantitative easing (QE) in Europe is weighing heavily: the Spanish sovereign narrowed by 10 basis points, slipping under 2% for the first time; the ...
Read more  01/12/2014
Weekly update 17 November 2014 
The results season has, so far, come up with few surprises (and therefore little volatility). That is, at least, an advantage of the zero growth (expected some months back), limited outlook for the majority of companies and balance sheets which are bolstered more by the lack of capex than by higher profits.  When you don’t expect anything, you are rarely disappointed… Since the black-hole in liquidity in mid-October, spreads have narrowed regularly and the primary market has picked up sharply: BG Group, Pirelli and CNP.
Read more  17/11/2014
Monthly update Octo Crédit Court Terme , January 2013 
Numbed by the LTRO’s injections of capital in December 2011 and July 2012, the money market looked like being unable to recover before January 2015, by which time all the loans should have been repaid to the ECB. But that assessment did not factor in the speed with which financial markets and the will of private banks to disentangle themselves from the embrace of Europe’s central bank ... possibly because some members of senior management and shareholders found it stifling.So, the first series of LTRO repayments surpassed all expectations and short-term rates halted ...
Read more  01/02/2013
Monthly update Octo Crédit Convictions, January 2013 
 Not alone in this, we felt that bonds were running out of steam. Not that we thought that no bond would ever be worthwhile again, or that all bond segments were over-priced. Rather, we thought that the homogenous trend fuelled by peripherals (with the exception of Greek 5-years, PIIGS narrowed in 2012 losing 450bps), cores (Germany 10 years 2012: -60bps), credit (BBB 5 years 2012: -93bps) and financials, would soon be coming to a standstill.With this prospect in view, we lightened our entire portfolio in order to 1/ protect the gains made, 2/ benefit fully from any ...
Read more  01/02/2013
Monthly update Octo Tréso-Crédit, January 2013 
Numbed by the LTRO’s injections of capital in December 2011 and July 2012, the money market looked like being unable to recover before January 2015, by which time all the loans should have been repaid to the ECB. But that assessment did not factor in the speed with which financial markets and the will of private banks to disentangle themselves from the embrace of Europe’s central bank ... possibly because some members of senior management and shareholders found it stifling.So, the first series of LTRO repayments surpassed all expectations and short-term rates halted ...
Read more  01/02/2013
Weekly Update 5 January 2015 
The year 2014 ended on tenterhooks. The funds, still in the black, waited with baited breath to make sure that that there would not be yet another reversal to wipe out their yearly performances, as was the case in August, October and (early) December. Those funds which did not manage to weather the storms of one of these three episodes, lasting up to two weeks, will attempt to convince their investors that the trends were merely ‘inconsistencies’ or market blips. There is uncertainty with no sure outcome.


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