Market Mechanics: The Greenium Puzzle
Sovereign green bonds are often assumed to trade richer than their conventional peers – a pricing effect known as the greenium.
Insights
Bonds Don’t Need to Be Negatively Correlated with Equities
Dr. Laura Ryan’s research challenges the belief that bonds must be negatively correlated with equities to reduce risk, showing instead that relative volatility matters more – even when correlation is positive.
Market Mechanics: Gilt Shock Exposes Systemic Fragility
Gilts were back in the market’s crosshairs this week, as a sudden repricing in UK government bonds reignited concerns around fiscal credibility and underscored the shifting structural risk profile of duration assets.
Solvency II and Derivatives – Part 1
Over the next few months, we’ll be releasing a short series of papers exploring how Solvency II (SII) applies to the use of derivatives within a pure relative value investment strategy. This first paper lays the groundwork for the series by outlining how we understand the core principles of SII as they relate to derivatives in a pure RV context.
Market Mechanics: Northern Rates Head South
The surprise rate cut by Norges Bank and the Swiss National Bank’s return to a zero-policy rate triggered sharp moves at the front end of yield curves this week, as traders rapidly repriced easing expectations. In Norway, two-year yields dropped a not insignificant 10 basis points, while Swiss short rates compressed toward zero, flattening local […]
Market Mechanics: Japan’s 40-Year Bond Auction – A Weak Signal for Long-End Demand
Japan’s 40-year government bond auction on 28 May 2025 recorded its weakest demand since July last year, with a bid-to-cover ratio of just 2.21. The soft result pushed the 40-year yield up to 3.375%, driving a significant steepening of the super-long end of the curve and highlighting the growing risk premia investors now require to […]
Navigating Volatility: Why Fixed Income Relative Value Matters Now
Recent months have seen heightened volatility across financial markets, with riskier assets such as equities and corporate bonds bearing the brunt of the associated uncertainty. In times like these, investors increasingly turn to products that offer both diversification and downside protection.
Market Mechanics: Dutch pension reform
On 20 May 2025, the Dutch Parliament narrowly rejected a proposal (73–72) that would have allowed individuals to vote on opting out of the country’s transition from Defined Benefit (DB) to Defined Contribution (DC) pensions. The proposal, backed by opposition parties, was not intended to stop the reform but to give individuals more choice. The […]
The Evolving Landscape of Fixed Income Investing
Ardea IM explore how relative value can add diversification to core investment grade credit portfolios by adding to relative value with uncorrelated returns and effective portfolio diversification.
Rethinking Portfolio Diversification: Why Relative Volatility Outweighs Correlation
Dr Laura Ryan’s research challenges the traditional reliance on correlation for diversification, emphasising that relative volatility and volatility predictability are more critical metrics for effective risk reduction.