High-yield bonds’ attractive income has made them popular in today’s low-rate environment. But market complacency has caused callable-bond investors to ignore a lurking risk: duration extension in a rising-rate scenario.
Bond investors have historically enhanced their returns by taking on more interest-rate or credit risk. Today, a third opportunity is emerging for investors: the liquidity premium. (more…)
By Doug Peebles (pictured) and Ivan Rudolph-Shabinsky of AllianceBernstein (NYSE:AB)
The US Fed has said it will almost certainly boost short-term interest rates by 2015, and many bond investors are focused intently on managing the risks of rising rates. But it’s also important to recognize that there are benefits. (more…)
We think investors who build laddered portfolios to protect against rising rates will be disappointed—by locking in low yields with traditional ladders or by hidden risks of higher-yielding ladders. In our view, actively managed portfolios are better able to take advantage of changing markets.
Posted by Jorgen Kjaersgaard (pictured) and Steve Hussey of AllianceBernstein (NYSE: AB)
European banks are issuing new subordinated bonds that can be written off in a crisis. For investors who are willing to take the risk, our analysis suggests these bonds may provide a way to beat the low returns in today’s corporate bond market.
Asia’s three biggest economies—China, India and Japan—are carrying out reform programs. Taken individually, these may do little to excite investors’ imaginations, but taken together, they become much more interesting.
Chasing returns into—and out of—specific credit sectors happens so often in bond markets that it hardly rates a raised eyebrow. But running with the herd can be risky, which is probably why Federal Reserve officials reportedly have discussed slapping exit fees on bond funds to avoid a disorderly rush to the exit. (more…)
In early 2013, we urged investors to take a hard look at the interest-rate risk in their bond portfolios. If they didn’t do it then, they have a chance to do it now. (more…)
This year’s leveraged buyouts (LBOs) are being financed with more debt and include fewer protections for creditors. Regulators, the press and market participants are watching this closely, and so are we. But we don’t think it’s worth losing sleep over—at least not yet.
The notion that China’s currency, the renminbi (RMB), is on a long-term path of appreciation appears in question after its sharp decline since February. We think that the setback is only temporary—and that the currency will resume its climb in a few months.