Global Bonds: Protection in Down Markets
As US Treasury yields continue to plumb record lows, some have quipped that government bonds have gone from offering risk-free returns to “return-free risk.” Indeed, when interest rates inevitably rise from their current levels, bondholders face the prospect of poor or even negative returns.
read moreIs Your Global Bond Fund Riskier than You Thought?
Global bond funds continue to attract strong inflows as near-zero interest rates lead many investors to look abroad for assets with attractive yields. As we’ve argued before, global bonds provide many important benefits, but it’s crucial that investors select the right type of fund.
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Emerging-Market Credit
Has Come of Age
While investors have flocked to emerging-market government bonds in recent years, some still perceive emerging-market corporate bonds as an immature asset class. Shamaila Khan, who manages global credit portfolios, questions some assumptions about emerging credit.
read moreThree Cities in Three Weeks: A Significant Trend in Municipal Bankruptcy?
On Tuesday, San Bernardino, California, became the third California city in three weeks to announce its intention to seek bankruptcy protection. Does this mark the beginning of a significant trend toward bankruptcy, particularly in California? My colleague Guy Davidson examines the patterns.
read moreLDI: More on Going Global in Bonds
For liability-driven investors, exposure to global bonds offers important benefits: a strong correlation to domestic debt, with greatly reduced volatility. However, these are not the only positives. Today, we’ll look at some other important benefits—such as greatly expanding the investable universe and offering a natural hedge against the tail risk of a domestic credit crisis—and [...]
read moreLDI: How Large an Allocation to Global Bonds?
Liability-driven investors can reap significant benefits from globalizing their long-duration bond portfolios, but how much should they sow? How large an allocation to nondomestic bonds is appropriate? Our research suggests that even a modest allocation can meaningfully improve an LDI portfolio’s risk-adjusted return potential.
read moreStockton’s Bankruptcy: Not a Harbinger of Things to Come
The financial failure of Stockton, California, is a sad tale of inflated expectations and poor decision making, but it’s not a harbinger of things to come in the US municipal bond market. Stockton is a unique case, as my colleague Guy Davidson explains below.
read moreLDI: The Case for Going Global in Bonds
Despite compelling evidence in favor of global diversification, investors in many markets around the world continue to have a strong “home bias”—a preference for domestic over foreign assets. Nowhere is this tendency more apparent than in the ranks of liability-driven investors. But our research shows that LDI investors, too, can reap significant benefits from going [...]
read moreDon’t Be Caught Long: Strategies to Curb Interest-Rate Risk in the Municipal Market
A municipal portfolio full of bonds with maturities in the 20- to 30-year range is exposed today to the high risk of rising interest rates. As my colleague Wayne Godlin explains, now may be the right time to shorten your duration and lower your credit quality.
read moreWhat We’ve Learned from Municipal Distress
Is the municipal bond market on the verge of collapse? You might think so, given the blaring headlines about a few big disasters in the last year. But as my colleague Joe Rosenblum explains below, poor decision making, not systemic issues, has caused the most serious problems.
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