At the Financial Times, Amin Rajan explains that a lack of liquidity, which was strangled by post-2008 Financial Crisis regulation, could deepen any future financial crisis. Put simply, traditional market makers for fixed-income products cannot now warehouse risk because of the effect of the regulation to enhance global financial resilience introduced after the 2008 crisis. This is best shown by US investment grade credit. It grew by 43 per cent between 2007 and 2018, while dealer inventories were just 6 per cent of what they were in 2007, according to JPMorgan Asset Management. The new … [Read more...]

Imagine a bond from a creditworthy country that pays you each year for 100 years. The only catch is, it only pays 1.2%. Would you buy it? In Bloomberg, Marcus Ashworth calls the idea of the 100 year bond at 1.2% "madness." He writes: If you needed any more proof that the world of fixed income has gone mad in the rabid hunt for yield, look no further than the Republic of Austria. If you liked its 100-year debt issued two years ago with a 2.1% return, how about settling for the same maturity for 1.2% now? Yes, you read that right: A 100-year bond yielding about 1.2%. Austria is in the … [Read more...]

Raise your hand if you enjoy the car buying experience? Anybody? The consumer car buying experience is widely regarded as one of the worst there is. The Internet has made things a little bit easier, as you can now do some basic research so you don’t have to walk blindly into the dealership, but the dealer still has the upper hand. If you try to negotiate a price on your trade-in for example, the dealer will budge less on the new car you are trying to buy. If you are leasing, the dealer may give you a good price on the new car and your trade, but he’ll jack up the lease … [Read more...]

Would you pay someone else to take your money? If you answered no, good for you. If you answered yes, many investors in European government and even corporate debt feel the same. The Wall Street Journal's Daniel Kruger reports that investors have been paying European governments and even corporations like LVMH to hold their money by purchasing bonds at negative yields. Kruger writes: A growing number of investors are paying governments in Europe for the privilege of holding their bonds. The amount of negative-yielding government bonds outstanding through 2049 has risen 20% this year to … [Read more...]

Bill Gross, manager of the Janus Henderson Global Unconstrained Bond Fund, best known for his time managing the Pacific Investment Management Co.’s Total Return Fund, has decided to retire. Gross has spent over forty years changing the way people invest in bonds. Bloomberg reports: Gross, who announced his retirement Monday, struggled in the last four years as head of the Janus Henderson Global Unconstrained Bond Fund. His performance failed to match the stellar track record he achieved while building Pacific Investment Management Co.’s Total Return Fund into a bond giant. “I look back … [Read more...]