Insights & News

Markets

  • The 2017 Bank Stress Test – introducing the BES

    The Bank of England released its assumptions for the 2017 annual stress test yesterday (key elements of the 2017 stress tests), the results of which will be published in Q4 2017.  Yet again, the banks will be tested against an onerous set of scenarios, with the UK stresses being fairly similar to the 2016 version, although global stresses are more severe. To summarise, some of the headline assumptions are, UK […]

  • Insurance Call Risk Being Rewarded

    The callability of financial institution bonds is a risk that always demands a lot of our focus, with the value in these bonds often being intrinsically tied to whether they would be called at the first call date or have the maturity extended. For banks this will partly depend on whether the bonds will continue to count as a form of capital and if not, how expensive the bonds would […]

  • A Clearer Technical Picture

    The markets had an interesting day to digest yesterday, with elections in the Netherlands and an FOMC rate decision making for a potential bump in the road for the current rally. As it happens, it was only the UK government that suffered the bump, with Chancellor Philip Hammond falling victim to the Ides of March after being forced into an embarrassing U-turn of his proposed National Insurance tax rise; good […]

  • Would An Independent Scotland Be In The PIIGS?

    During the 2010 euro bailouts and subsequent 2011 sovereign crisis, investors became so concerned about exposure to the euro bailout countries of Portugal, Ireland, Italy, Greece and Spain, that the acronym ‘PIIGS’ was coined. The most common question in meetings I had with investors during that period was “What is your PIIGS exposure?”. Is it now time for the membership of PIIGS to change? It might just be, for two […]

  • Riskless Rather Than Risk Off

    We have come to that point again when the risk-off portions of fixed income portfolios may well present us with much unwanted mark-to-market risk. The US market has rapidly responded to the various Fed Governor comments that a rates hike next week is now firmly on the cards, and that the pace of hiking in 2017 will be far more meaningful compared to the previous two years. US Treasury yields […]

  • Technical Drivers Persisting

    Having booked a few profits in early February to give ourselves some firepower for any future rise in credit spreads, we have continued to observe the strong technical picture dominate fixed income flows ever since. Flows into higher yielding fixed income fund sectors have continued to be positive, while issuance has continued to be muted, especially in those sectors that we have favoured as 2017 top picks, namely bank capital […]

  • Views from a Local

    After an eventful 2016 (with the UK electorate voting to leave the EU and a Trump victory), this year our attention switches to the core of the Eurozone as voters decide which path their future should follow; the Dutch elections take place in three weeks (15th March), with the first round of the French presidential elections following in April, and the deciding second round on 7th May. Both the French […]

  • ECB Staying Focused on the APP

    The minutes from the January ECB monetary policy meeting, released yesterday, made for fairly dull reading although one passage did strike a chord of interest with us. In the Governing Council’s discussion on monetary policy decision, members “considered the implementation of the APP (asset purchase programme) to be proceeding smoothly following the decisions taken in December to expand the universe of eligible assets”. It seems fairly normal that the committee give […]

  • Next Year’s Skeletons

    One of the features of hot fixed income markets is that participants are more willing to accept lower yields than perhaps the borrowers deserve to pay.  When supply becomes quite short, and dealer inventories get too low, this problem is exacerbated and borrowers that cannot always access bond markets, find a way to get a deal done. Quite often this can be driven by the banks; they have loans to these […]

  • Market Becoming Complacent

    Having enjoyed an extended Christmas rally all the way through January and now into the second week of February, there are a few clouds appearing on the horizon that have caused us to take stock and start booking some early profits, while the technical position remains strong and liquidity remains available. So what is worrying us? Quite simply it is politics, on a variety of levels, and despite there being […]

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