Market Insights

The vanishing yield cushion

Conventional approaches to fixed income investing rely on bond yields to generate returns. Most of the returns come from accumulating portfolios of bonds to harvest yield.

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The asymmetry of interest rate duration risk

A common way to think about bond yields is to view them as a cushion that protects bondholders from the potential negative effects of duration risk. As bond yields have now collapsed to very low levels, that protection from duration risk has vanished.

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Mrs. Watanabe meets European insurance companies

Since the early 2000’s the name ‘Mrs. Watanabe’ has been used to describe yield seeking Japanese retail investors, who were forced to increase their offshore investment risk taking in response to ultra-low interest rates back home.

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Compensation for credit risk is poor

Following the sharp sell-off in Q4 2018, credit markets globally have performed strongly in 2019. Having seen a big dip, followed by a quick rebound, how are we now left?

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