EM Sovereign Debt 2014: Neither Phoenix nor Failure

Emerging-market (EM) sovereign bonds were burned badly in 2013. Will they rise from the ashes in 2014? We believe some will and some won’t. The watchword for 2014 will be selectivity.

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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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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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With Rates Going Up, Give Bonds Some Credit

After the bond market’s stumble last quarter, defending against rising rates has moved front and center for many investors. One approach that has been effective over time has been exposure to credit-oriented sectors and strategies.

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Concerned About Rising Rates? Add Ballast by Going Global

A US-only bond investor is affected by one business cycle, one yield curve and a single monetary policy. As long as rates were falling, that seemed like a good thing. Not so these days.

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Opportunity Knocks for Mortgage Investors

We don’t usually think of rising rates as being good for homeowners. That may be because we’re accustomed to thinking of financing (and refinancing) as the key to reviving sagging housing markets. And it’s true that financing availability remains tight, at least by historical standards, and isn’t going to get looser with rising rates.

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For Abenomics, the Hard Part Is Still to Come

Prime Minister Shinzo Abe’s “Abenomics” program, designed to revive Japan’s economy, was a big success in its first five months, easily surpassing low expectations. But it’s drifted off course since it began, and the going is sure to get tougher from here. Still, it’s too early to write off this policy experiment.

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Keeping Your Balance During Shaky Markets

By Paul DeNoon (pictured) and Gershon Distenfeld While capital markets have had their ups and downs, it’s been at least 15 years since we’ve seen such a broad swathe of the global markets take a hit at the same time—risky and “risk-free” assets alike.

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DC Solutions: Adding Global Bonds to Target-Date Funds

By Alison Martier and Seth J. Masters Within US defined contribution (DC) target-date funds (TDFs), whether we’re considering customized TDFs for larger plans or packaged solutions for smaller plans, our research shows that having a bond allocation that is not US-centric can lead to better outcomes and enhance the effectiveness of the glide path.

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