Our forecasts for longer dated government bonds were for yields to gradually rise during 2018, but not in an uncontrolled manner.

As the credit cycle develops across different economies, our asset allocation changes to reflect that, and if it looks to be at a mature stage in a specific country then our natural focus on credit quality becomes more important; we are always trying to avoid next year’s problem credits, whether in the financial, corporate or securitised markets.

1994 was my first full year in the markets, and what a baptism of fire it was.

As we start the new year and approach the 5th anniversary since the issue of the first European Additional Tier 1 (AT1) bond (BBVA 9% Perp-18), it is a good time to re-assess the sector in the current market.

As most of our readers know, ABS is an asset class that lends itself well to detailed underwriting, from onsite due diligence through to cashflow and risk modelling.

The magnitude of the strong beginning to the year has probably surprised even those who were forecasting a positive start to 2018.

The BTL sector has taken a bit of a pounding over the last couple of years, as authorities introduced a number of harsh measures to counter fears of “financial stability risks” posed by growth in lending, with concerns that future financial tightening could lead to a surge in landlords looking to exit the market should they become stressed, and subsequently cause a house price crash.  The measures included:

Way back in the summer of 2012 we wrote in our blog Picking up the PieCeS about a newly launched industry initiative to develop a set of best practice criteria for European ABS, awarding those deals that met the conditions with a label of qualification.

Last year we wrote about the forthcoming "STS" (Simple, Transparent and Standardised) regulation for securitisation, designed in part to harmonise eligibility and capital charges for ABS across the wider regulatory landscape.

Escalating geopolitical tensions have contributed to a volatile past week for investors, but uncertainty regarding central bank action continues to dominate the bond markets, with one investment bank now predicting nine straight hikes from the Fed beginning at its March meeting.