Detroit and Illinois Work Toward Resolving Their Issues

Recent negative news about Detroit’s bankruptcy and Illinois’s pension overhaul has raised fears about the poor financial health of many cities and states. And it’s shaken individual investors’ confidence in municipal bonds. Just how worried should investors be? Not very, in our opinion, as bond defaults remain very rare. In fact, we view recent events [...]

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Want Safer Yield? Cycle to Europe

Gershon Distenfeld (pictured) and Jørgen Kjærsgaard For high-yield investors with large US credit exposures, these are uncertain times. The pricing of securities is becoming more volatile, spurred by interest-rate volatility, and companies are borrowing more, causing concern about their future creditworthiness. The solution, in our view, is to diversify—and we regard the European high-yield markets as attractive.

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Dig Deep—Then Dig Some More—to Uncover Risks in EM Corporate Debt

Emerging-market (EM) corporate debt returned big numbers for investors in recent years, as the sector rode a general wave of optimism about the future. But those days are gone. In 2013, successful investors have had to take a more painstaking path.

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Are Bank-Loan Investors Getting What They Bargained For?

Ashish Shah (pictured) and Ivan Rudolph-Shabinsky Investors who chose high-yield bank loans over high-yield bonds earlier this year, expecting to be insulated against rising rates, might be surprised to find that bonds might have worked out better.

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The Fed Did Nothing—but Bond Investors Can Act Now

The US Federal Reserve surprised the market on September 18 when it announced that it wouldn’t “taper” its monthly US$85 billion asset purchase program until the economy strengthens. Many investors saw this as a reprieve. We see it as a chance to position bond portfolios for rising rates.

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Illinois and California: Similar Challenges, Different Approaches

Joe Rosenblum (pictured), Neene Jenkins and John Ceffalio Every state faces challenges when it comes to balancing the books, but not every state is equally effective at tackling them. The responses of California and Illinois to post-2008 difficulties show how different the approaches can be—and how much is at stake.

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GSE Reform Lumbers Up to the Starting Gate

Momentum is finally building to do something with Fannie Mae and Freddie Mac. The bipartisan Corker-Warner proposal, now making the rounds on Capitol Hill, aims to dissolve the GSEs and start fresh. Meanwhile, Fannie and Freddie are testing innovative mortgage-security structures that transfer the risk of borrower defaults to the private sector.

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Beware the Dangerous Stretch for Yield

The US Federal Reserve talked in early summer about tapering its quantitative easing plan and raising interest rates—in part to stop investors from chasing yield into the arms of riskier loans. In the high-yield market, however, the conversation had exactly the opposite effect.

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How Much Will Fed Tightening Hurt?

Seth J. Masters (pictured) and Ding Liu A lot of people worry about what will happen when the Federal Reserve lets interest rates rise. Our research suggests that’s not the big risk. 

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This Rate Cycle Is Different, but Stocks Should Still Do Well

By Chris Marx (pictured) and Alison Martier Stocks have generally performed very well in rising-rate environments. But the current rate cycle is unlike any other of the past 40 years, keeping investors on edge. A lot will depend on how inflation behaves.

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