Fixed Income

The fourth quarter of 2018 is starting to look like a distant dream for the US high yield market. In the first three weeks of this year the US HY Index (B1-rated) has produced a year-to-date total return of 3.98%, while the equivalent CCC-rated index has delivered a YTD return of 5.63%.

After a long weekend, US investors came back to a busy primary market. Despite the weaker tone, investment banks announced a handful of new deals, all of which were heavily oversubscribed and from a healthy variety of issuers.

CLO investors like to talk a lot about arbitrage, or rather the lack of it. Arbitrage is what is left of the monthly interest on the leverage loans in the CLO pool once the liabilities have been paid, and it is the main reason why a growing number of investors have been buying CLO equity in the last 18 months.

In our latest video we hear from Partner and Portfolio Manager Ben Hayward as looks back on the performance of the ABS strategies in 2018 and looks ahead to the coming year.

All banks’ highest quality capital is supposed to be permanent or perpetual. However, many bank regulators around the world allow banks to issue Additional Tier 1 Capital, colloquially known as ‘Coco’ bonds, as part of this capital base. These bonds are perpetual, but the bank has the option to call them after a specified period, typically five, seven or 10 years. These securities therefore tend to trade to the call date, and not to perpetuity, as investors rightly or wrongly assume that the banks will probably call and refinance these securities. The banks are under no obligation to do this, and some have said that that they would only do so if it was in their economic interest come the call date.

In our latest video Chris Bowie looks at the performance of the Outcome Driven strategy in 2018 and looks forward to 2019.

In our latest video Eoin Walsh looks back at performance for 2018, and provides outlook for the year ahead.

The year 2018 will go down in the history books as one of the most challenging we have faced in recent times, with price action in the fourth quarter being particularly brutal and difficult to respond to. When we wrote our outlook for 2019 at the start of December, we were reasonably cautious and felt it possible that prices could dislocate from fundamentals during the year, if markets started to price in the increasing likelihood of a more meaningful downturn or recession in 2020. We were not expecting this to happen in December, but it did, and it has left investors wondering whether this is the beginning of the end of the cycle, and whether months like December will be commonplace in 2019.

TwentyFour Asset Management, the London and New York-based specialist fixed income investor, has announced a reduction in fees for the Monument Bond Fund (Monument), its flagship asset-backed securities (ABS) offering.

TwentyFour Asset Management, the London- and New York-based specialist fixed income investor, has announced the appointment of two new partners from within its portfolio management team.

We hear from the portfolio managers about how their fixed income specialism gives them a unique insight into global bond markets.

Ben Hayward looks back at performance for Asset-Backed Securities and provides an outlook for the rest of 2018.