Mon, Apr 21, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Augustus’ Tim Haywood: Investors in government bonds face difficult year due to increased risks and ending of quantitative easing in UK and US

Thursday, January 14, 2010
Opalesque Industry Updates - Tim Haywood, Investment Director at Augustus Asset Managers Ltd ( a subsidiary of GAM), investment advisor to three of the four Julius Baer Absolute Return Bond Funds (total €4572.96m AUM as at 31.12.2009), commenting on investments in government securities in 2010 said:

“Investors in government bonds face a difficult year due to increased risks and concerns over the ending of quantitative easing (QE) programmes in the UK and US. There is a raft of potential bad news overhanging the government fixed-income markets - be it heightened risk of default, rating downgrades, inflation scares when there is so little yield protection, buyers strikes as well as the end of, or pausing in, QE."

“By example, the Bank of England reverse auction of corporate bonds at the end of last week could signal the start of the unwinding of its other, far larger, holdings of gilts. Banks are being encouraged to lend: if that pressure becomes significant, we have concerns that the Bank will not find sufficient buying demand at low yields if this reverse auction programme extends into gilts."

“In the UK, the range of possible outcomes has rarely been wider. At the pessimistic end, interest rates could be on hold for as long as two years as a new government this year concentrates on fiscal tightening, counterbalanced with an easier-for-longer monetary policy. Interest rates at such historically low levels for such a long period will do little to reduce concerns among investors in long gilts about longer term inflation fears."

“Our investment choices currently favour short dated (up to 2 years) sterling fixed income instruments, be that long call options on intermediate Eurosterling contracts, or short equivalent puts."

"Further afield, we are tactically long short dated US government securities after their swan dive last month and the less-than-stellar employment data just released. We are bearish about Japanese government bonds as the authorities there have a 'rising stock of debt / lack of required growth in tax income' dynamic which is becoming increasingly concerning.”


Augustus AM Ltd is an investment manager of segregated accounts and funds. Its core strengths lie in fixed income and foreign exchange markets. The firm manages c. USD$8.8bn of assets as at 30th June 2009 across three areas: traditional long-only, absolute return and single strategy hedge funds. We currently employ 28 members of staff.


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Banner
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: Classic Auto Funds Limited (CAF) launches several car investing funds[more]

    Bailey McCann, Opalesque New York: A new trend in alternative alternatives is emerging - car appreciation funds. Classic Auto Funds Limited (CAF) is the first to market with several funds that make super elite luxury cars into real asset investments. As a result of growing overseas demand couple

  2. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  3. Opalesque Exclusive: Hedge fund replicators evolve[more]

    Bailey McCann, Opalesque New York: Hedge fund replicators as a group of products tend to get a bad rap from hedge fund managers who suggest that the best a replicator can offer is dynamic beta capture. A

  4. Opalesque Exclusive: Pensions, endowments, family offices reconsider life settlement investments[more]

    Bailey McCann, Opalesque New York: Hedge funds were once the largest investors in the life settlement industry, now the industry is seeing more interest from pensions, endowments and family offices directly. Life settlements have always been considered a niche part of the investing landscape, an

  5. SEC allows investment funds to use social media[more]

    Bailey McCann, Opalesque New York: The Securities and Exchange Commission (SEC) has released new guidance letting investment funds and advisors use social media to promote client reviews. The guidance seeks to assist investment managers in developing compliance policies and procedures reasonably