The signs are there for the end of the expansion but they are not very strong

No-one really seems to have enjoyed the current economic expansion and now, because it has been going on for several years, some are worrying about the end. The typical end of cycle signs are there – rising inflation, higher interest rates, leverage and overvalued financial assets. But, really, they are all quite tepid. The Federal […]

17 March 2017 by Chris Iggo

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The best of times or the worst of times?

Economic momentum is improving. It is supporting risk assets and delivering good returns to investors. Can it last? It can if the Federal Reserve (Fed) does not need to raise rates too quickly, if the new US Administration can deliver on tax cuts, if corporate animal spirits are revived and if Trump shuts down his […]

6 January 2017 by Chris Iggo

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Huge uncertainty in forecasting the UK’s economic performance in the years ahead

The political turmoil over Brexit continues, the US presidential election race is as tight as can be and the European Union is living an existential nightmare. Monetary policy continues to be the main anchor for financial markets. Looking forward, if the growth outlook doesn’t improve and central bankers are running out of tricks, some dark […]

4 November 2016 by Chris Iggo

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A rate hike in the US is a greater probability than it has been for some time

The long anticipated rise in yields got underway this week. Credit has outperformed rates and inflation has outperformed nominal government bonds. Rates have bottomed – even the Brexit hit UK economy grew at 0.5% in the third quarter, reducing the need for another UK rate cut. A rate hike in the US is a greater […]

31 October 2016 by Chris Iggo

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Why would a foreign investor take the risk on the UK when its future economic and political position in the world is not known?

A heavily indebted nation withdraws from a massive trading block and its central bank cuts interest rates to 0.25 percent and resorts to buying corporate bonds in an effort to underpin confidence in the economy. What do you think its currency would do, go up or down? Welcome to post-referendum Britain. The pound is falling, […]

7 October 2016 by Chris Iggo

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For investment grade corporate bonds it will be the rate move that dominates total returns short-term

One of the fundamental implications of quantitative easing (QE) in the bond markets has been the impact of pricing of the highest quality bond assets. Investors pay a cost (in terms of reduced yield) to own the safest of assets. But increasingly they get pushed down the credit curve so over time ratings buckets become […]

30 September 2016 by Chris Iggo

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From austerity to neutral, and beyond?

Bond yields have risen over the last week. Not by much but by enough to wake up investors to the risks of depressed risk premiums and the dangers of central bank dominance. The policy backdrop might not change materially any time soon but there is enough talk about different policy directions for investors to understand […]

16 September 2016 by Chris Iggo

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Central bankers remain – more or less – in charge of bond markets

Al’right guv? – Central bankers were centre stage in terms of the media this week with Mario Draghi telling reporters at the European Central Bank’s (ECB) post-governing council press conference that he and his colleagues had not discussed extending quantitative easing (QE) in Europe, and Mark Carney telling the Treasury Select Committee that he felt […]

9 September 2016 by Chris Iggo

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Sterling bond investors have done very well, but it’s time to consider the inflation risks

Inflation has been non-existent in the developed world this year but inflation-linked bonds have performed very well in total return terms, and nowhere more so than in the UK. This has been driven mostly by lower real yields, reflecting both the grab for duration and the need to hedge future inflation risks. The returns surely […]

2 September 2016 by Chris Iggo

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The Bank restarts the printing presses but will it boost aggregate demand?

Re-starting the printing press – Reading about the Bank of England (BoE) cutting the bank rate to 0.25% and re-starting quantitative easing (QE) while I was away got me re-thinking about the effectiveness of monetary policy and how exactly QE is supposed to deliver higher growth and inflation. It is well understood that the economic […]

22 August 2016 by Chris Iggo

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