Monthly Archives: August 2016

Sovereign Bonds Aren’t Worth It, Swiss Re Says

The European Central Bank has turned government bonds into one of the riskiest asset classes, prompting Swiss Re AG to move more of its investments into corporate debt, according to the reinsurer’s chief investment officer.

“If you’re looking for a bubble, here you go,” CIO Guido Fuerer said in an interview in Zurich. “With government bonds, you’re not adequately compensated for the risk you’re taking.”

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Bank Lending: More Demand, Tighter Standards

Three times a year the Federal Reserve surveys bank lending officers about credit standards, loan pricing and the demand for borrowing.  The Survey provides insights into business and consumer borrowing as well as where the economy may be headed.  The results of the July 2016 survey, released today, echo the details in last week’s GDP report: consumers are spending money and helping the economy while business is not rushing to invest.

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PIIE : Is the Fed Behind the Curve?

The US economy may not be firing on all cylinders, but things are also probably not as bad as they look from the latest economic indicators. The bearish narrative is supported by few domestic indicators—the supposed threat to the United States has typically been framed in reference to “global factors” such as the slowdown of the Chinese economy. The Federal Reserve has removed its reference to external risks coming from the global economic environment in its last statement, so domestic economic activity is now the dominant piece of the decision-making process. There are three reasons why the US economy may be stronger than it looks.

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High-Yield ETFs Miss the Boat…Again

High-yield exchange-traded funds (ETFs) struggled last year, in part because energy bonds took a beating when oil prices fell. Does that make an ETF that avoids energy bonds a good idea? We don’t think so.

At least one asset manager recently launched an ETF that invests in every high-yield sector except energy. The idea is to limit the risk of losses and default associated with low oil prices, which can make it hard for oil and gas companies to service their debt.

That may sound appealing to investors whose portfolios were hurt by plunging commodity prices in 2014 and 2015. But we think the approach is a short-sighted one.

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Ignorance isn’t bliss : Over-reliance on numerical estimates of risk

Today’s highly quantitative risk management industry is the product of simultaneous advances in computing power and finance theory since the 1960s.

Exponential increases in computation speeds have allowed academics and practitioners to create a wide range of mathematical models, able to process vast amounts of historical data and create large numbers of projections of the future.

While undoubtedly useful when used appropriately, the resulting tools (now ubiquitous across the industry) have created an over-reliance on numerical estimates of risk.

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S&P : A Changing Bond Landscape in China

Although Chinese government bonds were first issued in 1950, and secondary market trading of these bonds was introduced in the late 1980s, foreign ownership of Chinese bonds has been negligible, largely due to the lack of market access for foreign investors. This is set to change with a series of policy initiatives from the Chinese government that have the goal of opening up Chinese capital markets to international investors, liberalizing capital markets and internationalizing the renminbi (RMB).

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ETFs to Be Wounded Not Crushed in a Stampede From Junk Bonds

If there’s a stampede for the exit in the junk bond market, it won’t be investors in exchange-traded funds that get hit hardest.

That’s the conclusion of the Financial Stability Board, whose members include the U.S. Federal Reserve and the Bank of England, published in a consultation document on Wednesday. It runs somewhat counter to warnings from Carl Icahn and Howard Marks that the funds can give an illusion of liquidity yet may be hard to get out of when market sentiment sours. It also gives a boost to ETF champions, such as BlackRock Inc.’s Larry Fink, who say the funds offer unparalleled transparency.

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China says debt won’t pose systemic risk if economic growth reasonable

China’s debt defaults will not pose a systemic risk as long as economic growth remains within a reasonable range, a state planning official said on Thursday.

The country’s overall debt risk is generally controllable, and corporate leverage ratios even have room to rise if economic growth falters, the official said at a briefing on issues related to China’s rising debt levels.

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The 2016 IFR India Offshore Financing Roundtable takes place on the afternoon ofThursday September 1 2016 at the Trident Hotel, Nariman Point, Mumbai.

The Roundtable will explore the various options for Indian companies to raise capital in both the offshore bond and equity markets.

An expert panel will consider domestic issuance in foreign markets for Indian companies, the volume of capital raising, and the regulatory, legal and tax frameworks enabling such transactions.

The event is free to attend.  To secure your place, just complete this short registration form.


Chinese rich population’demand for global asset allocation to increase fast: report

BEIJING, June 23 (Xinhua)– More rich Chinese are expected to send their assets overseas for better investment returns as the economy continues to open up, according to a report.

It is estimated that the proportion of Chinese individual assets to be allocated overseas will increase from the current 4.8 percent to about 9.4 percent in the next 5 years, with the Assets under Management (AuM) of overseas investment increasing to 13 trillion yuan (1.98 trillion U.S.dollars), according to the 2016 China Wealth Report jointly released on Wednesday by China Industrial Bank (CIB) and The Boston Consulting Group (BCG).

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Soft Global Economy Continues To Weigh On Emerging East Asian Bond Yields

Bond yields in most emerging East Asian markets fell between 1 March and 15 May amid a weak global economy. The exceptions were the People’s Republic of China (PRC) and the Philippines, where yields generally picked up.

In March, the Asian Development Bank forecasted that developing Asia’s growth would decelerate from 5.9% in 2015 to 5.7% in 2016 and 2017. In April, the International Monetary Fund cut its 2016 global growth forecast to 3.2%, down from 3.4% in January. Against this backdrop, bond yields in emerging East Asia generally decreased between 1 March and 15 May, including yields for 10-year local currency (LCY) government bonds.

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IOSCO issues Statement on Non-GAAP Financial Measures to assist issuers in providing clear disclosure for investors

Financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) provide investors, analysts, and other users with a defined basis for conducting financial analysis and comparison among different entities. IOSCO recognises that in addition to GAAP based financial statements, issuers also convey financial information using financial measures other than those that are specified, defined or determined by GAAP, commonly referred to as non-GAAP financial measures or alternative performance measures. Non-GAAP financial measures can be useful to issuers and investors because they can provide additional insight into an issuer’s financial performance, financial condition and/or cash flow. The use of nonGAAP financial measures also can provide issuers with flexibility in communicating useful, entityspecific information. Problems can arise, however, when non-GAAP financial measures are presented inconsistently, defined inadequately, or obscure financial results determined in accordance with GAAP. Furthermore, non-GAAP financial measures typically lack a standardised meaning and, if so, are generally not comparable from one issuer to the next.

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Is EBITDA a Non- IFRS number?

Surprise, surprise! EBITDA does not have to be a ‘non-IFRS’ number This is one of the most surprising takeaways we hear from investors when they read The Essentials— Presentation of Financial Statements, our investor publication that covers key elements of IAS 1 Presentation of Financial Statements, and explains how investors can make the most of the information presented.

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Moody’s Webcast : China Credit An Onshore Bond Market Dislocation Would Be Unlikely to Lead to Systemic Financial Crisis Tuesday, 16 August 2016 15:00 Hong Kong / 16:00 Tokyo / 17:00 Sydney

Moody’s Webcast : China Credit – An Onshore Bond Market Dislocation Would Be Unlikely to Lead to Systemic Financial Crisis

Tuesday, 16 August 2016, 15:00 Hong Kong / 16:00 Tokyo / 17:00 Sydney

Discussion Items

·         What are the effects from defaults in China’s onshore bond market?

·         Would tightening in liquidity trigger serious funding problems?

·         Would banks face disruptions from bond defaults?

·         What is the authorities’ likely strategy on defaults?

Michael Taylor, Managing Director and Chief Credit Officer, Asia Pacific

Lillian Li, Vice President – Senior Analyst, Credit Strategy and Standards

Ivan Chung, Associate Managing Director, Greater China Credit Research and Analysis(Q&A)

Yulia Wan, Assistant Vice President – Analyst, Financial Institutions Group (Q&A)

George Xu, Associate Analyst, Credit Strategy and Standards (Q&A)

The entire session — with prepared remarks and the Q&A — will last about one hour.  If you wish to participate, please RSVP early.


Registration Is Required

Replay information will be provided to registrants after the session. 

Submit Questions in Advance

Participants are encouraged to submit questions in advance of the session by clicking here.

Will the credit market bubble burst by 2017/2018?

Bubble theories and concerns are becoming quite common these days for several asset classes, prompting discussions and warnings, including those from federal regulators. This leads to some key questions: Are we in the midst of an inflating credit bubble and, if so, when is it likely to burst? Contrarily, are we experiencing an extended period of opportunistic debt financing?

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Understanding the performance of credit portfolios is essential in explaining a strategy’s merits to clients and prospects. At the same time, analysts need to comprehend the portfolio’s exposure to different sources of risk, identify unintended bets and clearly communicate risk forecasts. Integrating these processes to achieve a coherent, side-by-side attribution of both risk and return creates a powerful analytical tool.

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AIWMI and CCRA Global Community are pleased to associate with Government of Maharashtra’s Sydenham Institute of Management Studies, Research and Entrepreneurship Education (SIMSREE) for the Banking workshop schedule on Sept 19-24th 2016.

AIWMI Students and members are eligible for a special 20% Discount on the stated investment for the said workshop. Please use the code CCRA2016 while making payment

On completion of the course, certificate of participation. Experienced senior banking personnel will be conducting the course, placement and career counseling will be given.
For further information, contact-9029908700/9229833090/9867177194

Dates and Timings: Everyday from 19th September 2016 (Monday) to 23rd September (Friday) from 5.30 pm to 8.00 pm and on 23rd September, 2016 (Saturday) from 9.30 am to 5.30 pm.

Course Investment Fees: Rs. 5000 per participant. (Inclusive of 24th September, 2016 (Saturday) lunch, course materials, certificate and counseling)

Venue: SIMSREE, 3rd Floor, B Road, Churchgate, Mumbai

Registration form :

15% of Global GDP is in Negative Yielding Bonds

As of June 10, 2016, there is USD 10.6 trillion in negative yielding assets throughout the world—that’s more than 15% of global GDP. The increase in assets with sub-zero yields is evident when looking at theS&P Global Developed Sovereign Bond Index. On a market value basis, sovereign bonds with negative yields now account for 51% of the index (up from 27% at year-end 2015). Read more

Performance Analysis of Unconstrained Bond Funds

Most unconstrained bond funds claim to offer the following potential benefits:

  • Low correlation to core fixed income;
  • Attractive risk-adjusted returns; and
  • Actively managed downside risk mitigation.

We examined each of these claims for the average performance of unconstrained bond funds since 2011 and noted that fund performance varied among them.

– See more at:

On Demand Webinar : FASB Accounting Standards Update on Leases

IN FOCUS: FASB Accounting Standards Update on Leases
Program Description—The Financial Accounting Standards Board (FASB) is pleased to announce its webcast providing an overview of the recently-issued Accounting Standards Update (ASU) on lease accounting. The webcast will cover the following topics:

  1. The purpose and scope of the ASU
  2. Lessee and lessor accounting models
  3. Measurement considerations
  4. Lessee and lessor disclosures
  5. Transition and effective date
  6. Audience question-and-answer session.

    Speakers: Marc A. Siegel, FASB member; Daryl E. Buck, FASB member; Matthew Esposito, Assistant Director

    Learning Objectives:At the end of this program, participants will be able to:

    1. Obtain a general understanding of the history of the leases project and why it was added to the FASB’s technical agenda
    2. Have a broad understanding of the lessee and lessor accounting model, measurement guidance, and disclosures in the ASU
    3. Have a broad understanding of the transition and effective date of the ASU.