Bonds Archives - Page 2 of 7

Junk Bond Yields Soar as Defaults Rise

Junk bond yields have risen above 8% as investors’ fear a growing number of defaults are looming amidst weak sales and low commodity prices.

According to the Bloomberg World Bond Index, which measures high yield debt issued worldwide, the average yield of high-yield debt has risen to over 8%, while the yields on U.S. corporate bonds is nearing 8%. The yields on commodity-based company debt, particularly energy companies, is soaring the highest while bond prices fall.

Benchmark U.S. Treasury Yields Backed Up

US 10-year Treasury yield has risen 30 bp since Monday’s low water mark. There are a number of reports that are trying to link the back up in US yields to sales by China. The Chinese sales, in turn, link to its efforts to stem the decline in the yuan.

China may indeed have sold Treasuries. Bill Gross at Janus apparently suggested this is the case in a tweet he sent earlier this week. Reporters have been keen to follow the lead. Some media accounts intimate that China had notified US officials of their intentions.

Asians Sell Billions in U.S. Debt

Japanese and Chinese banks are selling hundreds of billions of dollars of U.S. debt as investors sour on the future of U.S. Treasuries.

In June, Japanese investors sold the most amount of U.S. Treasuries in a one-month period since 2013, when the taper tantrum caused yields to rise and investors to leave the Federal debt market on the fear of rising yields and falling prices for U.S. government debt. At the same time, Japanese investors sold German and French government debt, leading to concerns that Asians are losing interest in investing in the west.

Meanwhile, in the Fixed Income Market

Several recent developments in the fixed income space are distinct from the prospect of higher rates in the US and UK, or the ongoing purchases by the BOJ, ECB, and Riksbank.

Corporates have raised 157 bln euros by issuing investment grade bonds. Some observers have suggested this will be the fuel that spurs a euro recovery. Repayment of the borrowing will have to happen, and it will require the purchase of euros.

Rough Sailing Ahead for the East Asian Credit Market

After years of smooth sailing through calm market conditions, bond markets in East Asia are navigating through stormier weather.

Data from the supplement to the 2015 Asian Development Outlook released this week shows that weaker growth in the United States and the People’s Republic of China (PRC) has weighed down overall regional growth.

Bonds

What are Bonds and why are They Important?

Bonds are one of the most important but misunderstood parts of the financial industry, partly because there are so many different types that serve different purposes. Bonds have received extra attention since the Financial Crisis in 2007 and 2008. Bonds are loans issued primarily by governments and corporations.

Watching the Euro and Bunds Go Their Separate Ways?

Previously there was a good fit between the direction of German bund yields and the euro as this great graphic from Bloomberg illustrates. However, recently the relationship appears to be loosening. Consider that over the past week, the 10-year bund yield is up 3 bp and that is with yesterday’s 3 bp decline. The euro has fallen 1.1% over the same period.

Government Bonds Selling Quickly as Economies Improve

In the wake of the 2008 Global Recession, bonds became a favorite investment. Their safe returns on investment offered those contemplating retirement the type of security that they no longer felt banks could offer after a spate of failures. This led to the unusual situation of negative yields, where bonds sold for more than their yield values simply because investors wanted a way to safeguard most of their money.

Taking a Higher Level View on Foreign Holdings of US Treasuries

The financial media’s look at yesterday’s Treasury report on capital flows is myopic. The key take away, they say, is that for the first time since the onset of the global financial crisis, Japanese investors hold more Treasuries than Chinese investors.

Who Exactly, Pays to Lend Money?

All that is solid is melting into the air, or that is how it feels since several central banks in Europe have adopted negative policy rates. Sweden’s Riksbank became the latest with today’s move (-10 bp). The President of the Swiss National Bank assures us there is a limit, but it is not at the SNB’s -75 bp LIBOR target, which is where the Danish central bank has put its key CD rate.