China’s Uncertainties Won’t Stop Renminbi’s Rise
Recent data releases and the transition to new political leadership have created some uncertainty about China’s short-term economic outlook. While positive growth surprises are unlikely in 2013, we still think nothing can stop the long-term appreciation of China’s currency, the renminbi (RMB).
read moreLittle Cyprus Sparks Big Contagion Fears
The situation in Cyprus is still very fluid and very serious—perhaps more so than in Greece last year. While the country may be too small to have a meaningful direct impact on the rest of the euro area, the big issue for markets is the potential for contagion to more systemically important countries.
read moreTAG Could Be Tagged in Fiscal-Cliff Negotiations
Doug Peebles, Jon Denfeld and Ed Dombrowski Caught up in the wrangling over the US fiscal cliff is a little-publicized program that could have big implications for short-term investors and bond yields if the program expires on December 31. If the Transaction Account Guarantee (TAG) program ends, huge sums of money may start looking for a new [...]
read moreEuro-Area Periphery Faces More Pain to Complete Rebalancing
Most peripheral euro-area countries have significantly improved their competitiveness recently, but more needs to be done. With currency devaluation ruled out, further downward pressure on labor costs is likely, which will probably deepen and prolong recessions and interfere with fiscal adjustment.
read moreGlobal 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.
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 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 [...]
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