Ishrc � Discussion Threads

[kiwi2007] 05/8/2016 02:29

The MPC will look to purchase, via the Corporate Bond Purchase Scheme (CBPS), a portfolio of sterling investment grade bonds representative of issuance by firms making a material contribution to the UK economy, in order to impart broad economic stimulus. Corporate bonds issued by banks, building societies and insurance companies will not be eligible....

[spacecake] 20/7/2012 09:05

MIATA, The BOE QE programme buying corporate bonds ... extract from the BOE red book..

"64 To improve the liquidity in, and increase the flow of, corporate credit, the Bank also purchases and sells high-quality private sector assets through the HM Treasury-indemnified Asset Purchase Facility, namely commercial paper, secured commercial paper and corporate bonds. These purchases and sales are an example of the Bank acting as market maker of last resort. Although small in scale in comparison to gilt purchases, when financed by the issuance of central bank reserves, these purchases count towards the total amount of asset purchases authorised by the MPC."

[miata] 19/7/2012 09:52

"Whats going on here ?".

Answer: Quantative easing was announced on July 5th. (See TR25 thread).

[kiwi2007] 19/7/2012 07:02

Most, if not all, the other corporate bond ETFs Pound/Dollar/Emerging have followed a similar path this last month :o))

Seems that no one thinks interest rates are going up anytime soon.

Anyway, though most of the 'investors' on ADVFN look on bonds as boring when you compound and re-invest the interest payments bond ETFs have outperformed plenty of so called growth shares over the last few years.

[spacecake] 18/7/2012 13:55

Whats going on here ?

After struggling along in an 118 - 122 trading range for donkeys ages, the fund suddenly comes to life.

Could it be the cut in inflation attracting the buyers to corporates or no growth in equities ?

[kiwi2007] 16/3/2012 18:12

and...

a quickie from Credit Suisse
PM
They are joining this bond bears call
PM
And upgrading S&P forecast
PM
We take our S&P 500 year-end target up to 1,470 from 1,400. We see growing risks for bonds (and thus reduce our weighting in government and corporate bonds, which we add to equities). We now prefer equities to corporate bonds as the risk on trade.
What is bullish, what is new? Excess liquidity is now consistent with an 11% re-rating of equities (up from 4%); global earnings momentum is close to positive territory (and as this happens, markets normally rise by 8% in the following 6 months); equity mutual funds inflows have turned positive (but still below levels normally seen prior to a post-2008 market peak). On the macro front, the US recovery has broadened, there has been meaningful easing of Chinese liquidity and core Europe via the ECB and its banks now own Eu2trn of peripheral European assets (bringing forward the process of mutualisation and pushing the cost of a break up beyond a bail-out). Equities are now 9% above their 6-month moving average-but when this has happened, equities have typically risen by 7% over the following six months.
What is bullish and not new? Global PMI and US macro momentum are both consistent with stronger growth (4% and 3% respectively) than consensus expects. Valuations against bonds remain attractive: the US equity risk premium (ERP) is 6.1% compared to a warranted ERP of 5.3%. The P/E on trend earnings globally is 14x, at the low end of its range (the US market peaked since 2007 on a 12m fwd P/E of 13.2-15x, compared to 12.9x now). Equities remain an inflation hedge (until inflation rises above 4%) and we expect eventually to see synchronised QE before the end of 2013. Positioning is abnormally cautious versus sentiment (risk appetite hardly ever stays at just 'neutral' levels).
The risks remain the same: US fiscal tightening in 2013; China housing; euro strength and politics renewing euro tension and oil (if it rose to $150pb). Maybe bonds face a greater risk than equities.

[kiwi2007] 16/3/2012 18:05

UBS calling a secular bear market in fixed income

The secular bear market in bonds has begun

The jump in US Treasury yields this week marks a secular turning point for bond markets. We believe a long-term bear market has commenced. The source of the sell-off is clear-an improved and more durable global economic recovery, particularly in the US. Markets are beginning to challenge the Fed's commitment through 2014 to its current accommodative policy stance. And based on the evidence and our forecasts, the Fed will lose the challenge.
PM
Not a straight line
In our view, the sell-off will be sporadic, not a straight line. Fed policy won't change soon and a steep yield curve makes shorting Treasuries expensive. But barring an unexpected slowdown in the US or abroad, or an oil supply shock, we believe the trend toward higher yields in the months, quarters and years ahead is established.
PM
What does this mean for asset allocation?
The obvious investment implication is to reduce duration exposure in fixed income allocations, including to investment-grade corporate credit. Some might think rising bond yields are a risk for global equities. They are probably wrong. Provided that higher yields reflect improved growth expectations and reduced cyclical risk, global equity markets will remain underpinned. Equities should also benefit from an eventual asset allocation shift (which has not yet occurred) from bonds to stocks. Only in the event that rising yields represent either inflation or sovereign credit jitters will they tend to undermine the case for risk assets.
 Revised allocations
We reduce our duration exposure by cutting investment-grade credit to underweight and emerging market hard currency bond allocations to neutral. In light of decreased cyclical risk, we also trim our overweight allocation to implied equity volatility. We re-allocate to shorter duration high-yield corporate and emerging market local currency bonds. We retain overweight allocations to global equities, corporate credit, real estate and selected commodities. Our underweights are concentrated in nominal and inflation-linked government bonds and cash.

PM A big important call, i'd say

[kiwi2007] 06/3/2012 11:47

Corporate Bond Rally Grinds Along

BOND STRATEGIST: Spreads are tighter than they've been since last August


The corporate bond rally that started in earnest last fall continues to grind along. The Morningstar Corporate Bond Index tightened another 7 basis points over the past week to +188, nearly 80 basis points tighter than the widest point witnessed last October. Though spreads are now tighter than they've been since last August, they remain well wide of the levels seen a year ago.

We expect that developments across Europe will dictate whether credit markets head sharply higher or lower from here........more...

[kiwi2007] 14/12/2011 20:33

Not much of an article - never mentioned the other sterling iShare options such as IS15 or ISXF etc. And then goes on to say "The biggest holdings include bonds from Barclays and Tesco." - ignoring the fact that SLXX holds a significant percentage of financial companies bonds.



ETF of the week: time for corporate bonds?

It takes a brave investor to buy shares in today's volatile markets. Government bonds offer little salvation – in some cases investors think they will never get their money back, while yields on the perceived safe havens have fallen to negligible levels.

Corporate bonds could be the way out. "Good-quality company debt providing a reasonable yield has been increasingly appealing to investors," said Justin Urquhart Stewart of Seven Investment Management.

He said the markets seemed to be pricing in a high rate of potential default among companies issuing bonds, but "many are showing healthy results with lower borrowing and growing cash positions".

He added: "For more attractive returns than the unreliable and politically influenced equity markets, the bond funds are attracting more interest. A sensible move - but remember, only as part of a well diversified portfolio and not as one off bet."

One bond fund he is including in his clients' portfolios is the iShares Markit iBoxx Sterling Corporate Bond ETF. This holds debt issued by large companies from Britain, Europe and the US. The biggest holdings include bonds from Barclays and Tesco.

Investors can take a quarterly income from the ETF, which is currently yielding 5.6pc. The total expense ratio is 0.2pc.

[spacecake] 06/12/2011 20:26

Looks like it's ready for take off.

[kiwi2007] 05/12/2011 08:52

And time to buy again?

[kiwi2007] 01/11/2011 10:13

Seems to be right at the top of its channel. Maybe time to reduce?

[eithin] 26/9/2011 16:09

Checked with IShares. No recoverable tax credit in an ISA.

[eithin] 26/9/2011 09:16

Anyone know if these are held in an ISA if income paid as fixed interest with a recoverable tax credit as with fixed interest unit trusts and oeic's.

[kiwi2007] 12/9/2011 00:10

HMG may again buy corporate bonds?

Osborne sees no barrier to more QE



....part of its strategy is to argue that the Bank should use what the chancellor last week called "monetary activism" to relaunch the recovery in the short term through another round of QE.

Under the authority given by the then chancellor Alistair Darling, the Bank bought small quantities of corporate bonds in 2009. Suggestions of more exotic assets it could buy now include bonds issued by banks to reduce their costs of funding, property sitting on banks' books or even equities.

Such purchases would have a direct effect in boosting growth, but would expose the Bank to the risk of losing money and would therefore require underwriting by the Treasury.

[spacecake] 31/5/2011 08:37

Market predictions

So when will the MPC make the first move?



Interest rate futures (27 May) point to February 2012, pencilling in an increase from 0.50% to 0.75%. And then the next increase, to 1%, coming next summer.

But these market predictions are very volatile. The 'first rise' forecast has fluctuated between December and January for two weeks - and a month ago it was pointing to a move as early as June!

[bench2] 23/2/2011 19:11

rwilliams.... Does this pay twice or four times a year . What are the ex and pay dates ? Does it trade dirty or clean ?

[spacecake] 16/2/2011 12:16

Sterling plunged to the day's low against the dollar and the euro after Bank of England Governor Mervyn King hinted that markets are getting ahead of themselves in their rate-increase expectations.

The pound was trading at $1.6040 after the comments, compared with 1.6141 previously, while the euro was trading at GBP0.8430, compared with GBP0.8415.

The comments came after the U.K.'s Quarterly Inflation Report showed the central bank upgraded its near-term inflation forecast and said risks to economic growth were to the downside.

King said in the press conference afterwards that the central bank doesn't endorse market expectations and signaled that rate increases will happen at a more gradual pace than what is currently priced into markets.

Interest rate markets are now pricing in a lower probability of a rate increase before June and now only two rate increases are expected this year, as opposed to the three that were expected before the report.

[kiwi2007] 11/2/2011 20:45

Spacecake - Others seem to favour Nov 2011 but I doubt that they have anymore idea than we do. Personally I don't see base rates rising very high in this cycle.

Also, I wonder if this is already having an effect.

New regulations governing the European insurance industry could lead to a wave of selling of corporate bonds and equities, commentators believe.



Insurers gear up for new charges

By Steve Johnson

Published: January 30 2011 08:48 | Last updated: January 30 2011 08:48

However, the Solvency II rules could encourage insurers, with $22,000bn assets worldwide, to buy supposedly "risk-free" eurozone sovereign debt, particularly high-yielding Greek and Irish paper, just as perceptions of default risk have risen sharply.

Asset Allocation graphic for FTFMThe regulations, due to come into force in January 2013, could also exacerbate political tensions by encouraging insurers to buy more local currency emerging market debt – potentially pushing EM currencies up – and credit default swaps, which some governments have blamed for heightening the eurozone debt crisis.

"If insurers start moving in one direction en bloc, that will move the market," said Bob Cast, a vice president at JPMorgan Asset Management, amid suggestions that some large insurers have already started cutting their equity holdings in readiness.

Andrew Clare, professor of asset management at London's Cass Business School, said: "If [European insurers] start divesting their equity holdings, which represent over 80 per cent of euro-area gross domestic product, and increase their holdings of government bonds, the consequences for financial market prices in Europe could be large."

The Solvency II directive, which sets new requirements on capital adequacy and risk management for insurers, aims to change investment behaviour by imposing varying capital charges on assets. Equities will need to be backed by reserves of 30-40 per cent, while European sovereign debt is deemed risk free.

"[Local currency] sovereign debt receives preferential treatment to corporate bonds, even lower quality debt. It will encourage insurers to own a Brazilian sovereign bond, although it has to be in local currency, or an Irish or Greek bond," said Erinn King, senior vice president at Payden & Rygel, which manages insurance assets.

Samuel Sender of the Edhec-Risk Institute added: "Corporate bonds will not be used really to hedge liabilities. If you are holding corporate bonds you are taking an extra risk."

A large European insurer said it would be "crazy" for the industry to load up on eurozone sovereign debt in current market conditions.

Mr Cast believed short-duration corporate bonds would still be held, but agreed the "general push" would be into government bonds.

Equities, particularly EM, will carry a punitive capital charge, potentially leading to widespread selling.

Investment in structured credit, such as asset- and mortgage-backed securities, will also be "severely curtailed", said Mr Cast, who said "banks such as JPMorgan will be lobbying to change that".

Property will incur higher capital charges, while hedge funds, private equity, commodities and infrastructure are "very heavily penalised", Mr Cast said, adding: "That's unfair because not all hedge funds are risky and infrastructure funds are probably quite low risk. We do not think they are treated fairly against their economic fundamentals."

Mr Sender added: "Insurance companies invest in low risk hedge funds to diversify. If you have a higher capital charge, regulation almost prevents you from doing that. You will have a shift away from less risky investments."

In contrast so-called "total return" funds could benefit because insurers' liabilities will be measured using a "cash plus" benchmark. Ms King expected greater use of risk mitigation instruments, such as credit default swaps.

However a "look-through" provision in the directive penalises investments in pooled funds that do not provide full details of their holdings, meaning even ultra-safe money market funds could incur a capital charge of 30-40 per cent.

"Segregated mandates will be more attractive and the fund management community will have to offer more transparency in their fund range," said Mr Cast. "If they choose not to, effectively they are pulling out of the insurance market."

About half of global insurance assets are likely to be caught up in the directive, with Bermuda having promised to implement it and some non-European insurers doing business in the European Union likely to affected, alongside those based in the EU.

[spacecake] 11/2/2011 15:25

Bronwyn Curtis of HSBC on BBC world business report thursday saying no BOE interest rate rises until 2012 in her opinion.

[rwilliams57] 30/11/2010 14:23

slxx also has just gone ex, which is what I was waiting for. (damned if you do and damned if you dont)

[rwilliams57] 30/11/2010 14:18

I think the overlays show that slxx has gone down by 4.7% on the last month, and Isxf by 1.77.

It seems to me that banks are likely to be the culprits. They certainly were in the past, and that provided a buying opportunity for slxx when it was less than 100 early this year.

It seems to me that it might be a good time to take profits, because I can see the eurozone debt issue dragging on for some time affecting equities and fixed interest, particularly funds like slxx which are overweight in banks

[spacecake] 29/11/2010 22:19

Yes, I see the point regarding the financial holdings in this fund pulling the overall fund down, however iShares Markit iBoxx £ Corporate Bond ex-Financials (ISXF) has also took a fall and if you overlay the two funds on the same chart clearly the financial holdings are not the culprit.

Therefore, are we talking of inflation like the 1970's creeping in over the next few years due to the expanding money supply via QE ?

I have this holding hedged with a holding in AGCP

[ptolemy] 29/11/2010 15:37

Does anyone have a view - or articles - on the direction of investment grade corporate bonds. SLXX has fallen perhaps 8% in the recent past. I'm guessing the drivers are:

- inflation expectations rising
- yields on (risk-free!) goovies are rising, so risked investments must also rise
- (all) bond holders nervous at government/EU/IMF interventions.

Where now?

[rwilliams57] 28/11/2010 19:24

the issue might be that angela merkel is trying to make the senior debt holders of irish banks (eg aib) take a haircut. If that happens the prices of other bank debt might be affected partly by market sentiment and possibly really if contagion spreads to other countries.

UK would probably like to make the nationalised bank bondholders accept less for their loans. This has happenned for junior debt holders of at least one of the nationalised banks.

SLxx is overweight in financials, therefore the nervousness