In a theoretically efficient fixed income market, closely related bonds (or derivatives) with similar risk characteristics would always be priced consistently. In reality, these prices persistently diverge from each other, which means fixed income markets are inefficient.
Investment grade (IG) credit has been one of the worst performing asset classes so far this year, and its largest segment – USD IG credit – has been the worst hit.
Tamar Hamlyn discusses the current environment of tightening global liquidity and increasing government bond supply, which is having a knock-on effect on domestic liquidity.
Credit spreads over government bonds should compensate investors not just for default risk but also for other risks such as illiquidity. Gopi Karunakaran discusses how corporate bond markets are currently not providing sufficient compensation for growing illiquidity risk.
In a Livewire Exclusive video, Gopi Karunakaran discusses how banks withdrew from corporate bond markets after the financial crisis, and what this means for the US$560 billion in fixed income ETFs around the world.
Moody’s has recently commented that Australia’s “AAA” sovereign rating could be under pressure, notwithstanding the current stable outlook.
APRA yesterday announced a series of new measures aimed at reinforcing sound lending practices by financial institutions in Australia.
In recent months macroprudential measures have increasingly been under discussion in Australia. The Reserve Bank of Australia and other regulators now appear open to the adoption of such tools.