How to Build a TIPS Ladder Portfolio for Millennials

In his January blog post entitled “Try a TIPS Mixer in Your Equities Cocktail,” Phillip Murphy described the potential benefits of including Treasury Inflation-Protected Securities (TIPS) in one’s portfolio.  In this blog aimed at Millennials, I would like to propose an easy way to build up a 30-year TIPS portfolio for retirement.

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Special report: Italian SME- Capital Structure Analysis

CRIF Ratings (‘CRIF’) has analyzed the evolution of the financial structure of more than 15,000 Italian Small and Medium Enterprises (SMEs), with a turnover between EUR10m and EUR500m over the last decade. The main finding of the study is the lack of financial flexibility that in CRIF’s view is a major factor  constraining the companies’ growth.

Limited banks disintermediation, large recourse to short term debt and a relatively little amount of cash on balance sheet compared to short term debt are the most common features of SMEs’ financial structures. As a consequence, the financial profile of Italian SMEs remains generally weak and too much reliant upon the banking system to support the short and long term financial needs.

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Junk-Bond Investors Can’t Make Up Their Mind About Oil Prices

It was a celebrity breakup, of sorts, in markets.

At the start of this year, credit investors undertook a conscious uncoupling from oil prices. As the cost of a barrel of West Texas Intermediate leaped in the wake of the production cut agreement announced by OPEC in November, a measure of junk-rated bonds lagged behind.

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Germany Corporate insolvencies have fallen by 6.2 percent

Corporate insolvencies in Germany dropped in 2016. The number of bankruptcies decreased by 6.2 percent to 21,789 cases (2015: 23,222 company insolvencies). “By the seventh consecutive decline, company insolvencies fell last year to their lowest level since 1999,” said Bürgel Managing Director Klaus-Jürgen Baum regarding the current figures. In the crisis of 2009, 33,762 and therefore about 50 percent more companies had to file for insolvency in Germany.

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Webinar : Does a Particular Phase of an Economic Cycle Impact Corporate Credit Quality? Monday, 24th April 2017 India: 8:30 a.m. IST

Please join us for an informative Webinar to discuss recent research findings on How the Economic Cycle Drives Changes in Sectoral Credit Quality.

Paul Gruenwald, Chief Economist, Asia-Pacific, S&P Global Ratings and Paul Bishop, Director, Credit Analytics, S&P Global Market Intelligence will speak on the following topics:

  • The impact the economic cycle has on sectoral corporate credit quality
  • The sectors in the developed Asia-Pacific markets that have the highest fluctuations in credit quality based on a particular phase of the economic cycle
  • Current credit quality trends in Asia-Pacific markets and how to identify credit risk on a country and industry level using Probability of Default analysis

Date: Monday, 24th April 2017, Stay informed. Stay ahead. Register today!

India:  8:30 a.m. – 9:30 a.m.

China/Hong Kong/Malaysia/Singapore/Taiwan/Philippines:  11:00 a.m. – 12:00 p.m.

Japan/Korea:  12:00 p.m. – 13:00 p.m.

Sydney:  13:00 p.m. – 14:00 p.m

Stay informed. Stay ahead. Register today!

 

Paul Gruenwald
Chief APAC Economist
S&P Global Ratings

Paul Gruenwald is the Chief Asia-Pacific Economist at S&P Global Ratings. Based in Singapore, he leads the economic research agenda and serves as the primary spokesperson on macro-economic matters across the region.

Before joining S&P Global Ratings, Paul spent almost five years at Australia and New Zealand Banking Group (ANZ) as the Asia-Pacific Chief Economist, where he was responsible for helping set and direct ANZ’s Asian and global economic research agenda, as well as building the bank’s economic research efforts and profile in the region. Previously, Paul worked at the International Monetary Fund (IMF) for nearly 16 years, where he led the team producing the IMF’s Asian regional outlook reports. He was also the IMF Resident Representative to Hong Kong and Korea, the Deputy Chief of the China Division, and the country desk officer for Australia.

Paul has a Ph.D. in Economics from Columbia University and a bachelor’s degree in Economics/Mathematics from the University of Texas.

Vishrut Rana
APAC Economist
S&P Global Ratings

Vishrut is Asia-Pacific Economist at S&P Global Rating. He furthers the team’s research on credit and its interlinkages with the macroeconomy. He supports the team’s role in analyzing key macroeconomic developments in the region.

Prior to S&P Global, Vishrut was with the Centre for Research on the Economics of Ageing at Singapore Management University as a Research Associate. Vishrut recently completed his Ph.D. in Economics from Singapore Management University, where his research focused on business cycles, credit and its interaction with the economy, and financial intermediation.

Paul Bishop
Director, Credit Analytics
S&P Global Market Intelligence

Paul Bishop is a Director in S&P Global Market Intelligence’s Credit Analytics team, based in Singapore. He is the Product Lead for Credit Analytics Products in APAC. Paul has experience as a product manager in the credit and counterparty risk space and was previously the Product Manager for Ratings & Credit Content in EMEA, based in London. Prior to this Paul focused on market strategy covering Investment & Commercial Banks, Private Equity and Credit Markets. Before working at S&P Global, Paul was a Private Equity analyst focusing on the infrastructure asset class.

Clemens Thym
Managing Director, Asia Pacific
S&P Global Market Intelligence

Clemens Thym is Managing Director of S&P Global Market Intelligence in Asia Pacific, based in Hong Kong. He is responsible for Risk Services, covering regional product and market development for ratings and credit data, research and analytics in Asia Pacific across the buy and sell side, lenders and corporates. He previously managed the S&P Capital IQ Desktop business and before that Standard & Poor’s Risk Solutions in Asia Pacific, where he helped lenders in China, Japan, Hong Kong, Singapore, Australia and other markets to develop, validate or enhance internal rating systems across a broad range of asset classes.

Clemens has extensive experience in credit analytics and their application to institutions in developed and emerging economies. Clemens is a thought leader and active speaker at conferences on various subjects of credit risk.

Clemens joined Standard & Poor’s Risk Solutions in 2001 in London. Prior to that, Clemens was a management consultant for with PricewaterhouseCoopers in Frankfurt where he was responsible for credit risk management solutions and seminars on this subject as well as the assessment of the impact of the new Basel accord on banks. He conducted various projects as project manager or team leader in European wide projects.

Clemens holds a Master of International Economics and Business of the University of Innsbruck, Austria in a joint program with the University of New Orleans, USA.

Asian Fixed Income: Continuing Rally for Indonesian Bonds

Indonesian bonds, as tracked by the S&P Indonesia Bond Index, gained 5.59% YTD as of April 5, 2017. This is a continuation of the strong growth trend observed in 2016, when the index increased 13.7% owing to the Bank Indonesia’s cut in interest rates on six occasions throughout the year. Indonesia has been one of the top three best-performing countries tracked by the S&P Pan Asia Bond Index over the past three years. Both equities and bonds have been performing well on the basis of solid economic fundamentals.

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Applying Equity Duration to Pension Fund Asset Allocation: A Review of S&P 500® Duration

Duration isn’t commonly associated with equities, but it should be.

Learn how to interpret measures of duration in the equity context and explore its essential role in portfolio immunization, risk management, and tactical asset allocation.

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Webinar : MOVING THE NEEDLE: AN INVESTMENT CASE FOR STRENGTHENING CORPORATE GOVERNANCE IN INDIA, 13th April 4pm IST

MSCI ESG Research’s latest research evaluates key Corporate Governance risks in India namely, concentrated ownership, related party transactions & succession planning among MNCs, PSUs and family conglomerates. We found Indian constituents of the MSCI ACWI Index underperform relative to the MSCI ACWI Index as a whole.

MSCI ESG Governance Metrics provides institutional investors with corporate governance research and data on over 7,000 public companies worldwide, focusing on four scoring pillars, Board, Pay, Ownership and Control and Accounting.

Join the webinar to learn more about Corporate Governance Trends in India, from MSCI experts.

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[Webcast] A Deep Dive on Factor Analysis, April 26, 2pm EST

AS FACTOR INVESTING AND ANALYSIS have gained traction with investors, differing views remain around how factors are defined, constructed and evaluated. We welcome you to join our panel discussion and debate as we explore timely topics:
 
TOPICS OF DISCUSSION
Robustness – what factors should we believe and why?
Capacity and crowding – practical concern or mass hysteria?
Factor timing – can it be done, and what should investors consider?
From passive to active, equities and beyond – how should investors think about the spectrum of factor applications?

The Truth About Brexit – The Absolute Return Letter, April 2017

UK politicians are not telling the full truth about Brexit. Why? Most likely because it is not in their interest to do so. UK exports to the EU are far more important to the UK economy than vice versa, and a substantial number of UK jobs could be at risk should the free trade agreement go up in smoke.That is only one of several issues our political leaders are concealing. Read more here.

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Evolution of the Green Bond Market

A few weeks ago, Martina Macpherson wrote the blog post The Rise of Green Bonds, in which she provided an overview and outlined some of the drivers behind their recent increase in issuance.  Indeed, green bond issuance ramped up significantly in 2016, and the accelerated pace is expected to continue this year.  Total issuance of bonds labeled as green in 2016 amounted to USD 92.9 billion, nearly doubling the size of the green bond market from the previous year (see Exhibit 1).

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Are Convertible Bonds More Like Equities?

Convertible bonds have “bonds” in their name but in reality they are complicated corporate securities with risk characteristics that often have little to do with straight bonds. Are they more like stocks or bonds? And how can investors evaluate and model them?

In today’s convertible bond market, the key driver of returns relates to the value of the underlying equity. In contrast, bond market exposure (in the form of yield curve and spread risk) has played a relatively minor role in driving convertible bond risk and return in the recent past and seems likely to play a minor role in the year ahead, based on our model. Read more

Bridging the Volatility Gap between IG and HY

The goal of the S&P U.S. High Yield Low Volatility Corporate Bond Index is to construct a high-yield bond portfolio with low credit risk and low return volatility by applying a low volatility factor.  Does the index methodology truly deliver the effect of reducing volatility?  The back-tested results of the 17-year period ending Feb. 28, 2017, show that the S&P U.S. High Yield Low Volatility Corporate Bond Index may offer an intersection that bridges the volatility gap between the high-yield and investment-grade bond sectors, with increased return efficiency.

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Rising Interest Rates – Boon or Bane for Pan Asian Dividend Strategies?

In December 2016, the U.S. Fed raised the interest rate for the second time in the current rate hike cycle.  Three more rate hikes were expected for this year, one of which took place in March.  In a low interest rate environment, companies that have increasing dividends or offer high dividend yields look attractive to income-seeking market participants.  But the yield offered by these companies may be considered less competitive in a rising interest rate environment.  Exhibit 1 shows how various S&P DJI Asian dividend and REIT indices have performed in U.S. interest rate cycles since 2004.

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Abu Dhabi’s NBAD Becomes Gulf’s First Issuer of Green Bonds

National Bank of Abu Dhabi is selling $587 million in a class of debt used to fund environmental projects, the first issue of green bonds from a region where governments are looking to curb dependence on oil as an energy source.

The state-owned lender is offering the five-year securities at 98 basis points over the mid-swap rate, according to a person familiar with the matter who asked not to be named because the information is private. Initial guidance was for 105 bps over the benchmark.

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UK toughens stress tests with sterling drop, wider bond spreads

LONDON, March 27 (IFR) – Global GDP will fall by 2.4%, sterling plunges against the dollar, UK interest rates rise to 4% and US corporate bond spreads will widen by 1,150bp under the 2017 “stress test” scenario for Britain’s big banks.

The Bank of England set out stress test scenarios on Monday for this year’s health check of seven bank and building societies. The annual test is aimed at making sure they are resilient enough to withstand a deep global and UK recession and severe stress in financial markets.

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China must urgently tackle soaring corporate debts, says OECD

China should urgently address rising levels of corporate debt to contain financial risks as it tries rebalance the nation’s economy, the Paris-based Organisation for Economic Cooperation and Development said on Tuesday.

Beijing should also step up efforts to retire “zombie” state firms in ailing industries to help channel funds to more efficient sectors and enhance the contribution of innovation in the economy, the organisation said its latest survey of China’s economy. Read more

LPC-Pension schemes pour money into European direct lending

Pension schemes are pouring money into European direct lending strategies, fuelling the growth of larger funds and the arrival of new entrants willing to lend to leveraged European middle market companies.

Hayfin Capital Management raised more than €3.5bn for its European direct lending strategy in February, while Park Square Capital and Japanese bank SMBC are setting up a new €3bn direct lending joint venture. Read more

 

Webinar : The Effect of IFRS 9 on the Banks’ Credit Business

The Effect of IFRS 9 on the Banks’ Credit Business 
 
Date: April 6, 2017
Time: 10:00 a.m. GMT
Speakers: 
Dan Bolland, Director in Banking, KPMG
Arnaud Picut, Head of Risk Practice, Misys
Other speakers will be announced shortly.

The new accounting standard will have significant impact on the credit business and the way credit decisions will be made in the future, starting from credit origination to final accounting. In this webinar, business experts will look at the way the new accounting standard will be impacting the decision making process from beginning to end, including the changing roles of CROs, Finance and Treasury.

In this webinar business experts will explore:

  • What are the practical implications that IFRS 9 will bring to financial institutions?
  • Which considerations should credit institutions take into account to arrive at a more aligned credit decision process beyond IFRS 9?
  • As a consequence, how will the roles between risk, finance and treasury change?
  • How extensive is the change of systems and processes and what should banks consider in their technology and implementation?