Mon, Sep 20, 2021
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Comment: The rising cost of currency hedges may require a re-think for fixed income portfolios

Tuesday, October 10, 2017

Matthias Knab, Opalesque:

Neuberger Berman writes on Harvest Exchange:

It's no secret that foreign inflows into U.S. fixed income markets have been an important source of demand for mortgages, investment grade credit and high yield securities over the past several years. The Bank of Japan's (BoJ) zero interest rate policy and the European Central Bank's (ECB) negative interest rate policy have helped increase the relative attractiveness of U.S. fixed income for non-U.S. investors.

What's perhaps less apparent is that, for non-U.S. investors, evaluating U.S. fixed income is not as simple as comparing U.S. yields to domestic yields. In our experience, most evaluate U.S. fixed income on a currency-hedged basis and then implement a currency hedge when they invest. That currency hedge can result in significant changes in the economics of foreign bond investing.

As our colleague Vivek Bommi noted two weeks ago on the spread differential between euro-denominated and U.S. dollar-denominated high yield bonds, this is a particularly important subject right now.

Currency-Hedged Credit Yields at Multiyear Lows

Its impact is felt well beyond the high yield markets. Relatively low U.S. yields, tight credit spreads, expectations for additional Federal Reserve hikes in 2018 and the potential fallout from the Fed's recently announced balance sheet reduction plan are co......................

To view our full article Click here

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. SPACs: The fall of the SPAC market has digital media companies in disagreement about best path forward, Cannae Holdings: SPAC bloodbath provides a good entry point, British car startup Cazoo raises $1bn from SPAC merger, Europe's incoming SPAC boom will create a demand for talent[more]

    The fall of the SPAC market has digital media companies in disagreement about best path forward From CNBC: The digital media industry has reached a strategic crossroads. Earlier this year, special purpose acquisition vehicles (SPACs) appeared to be the long-awaited savior of digital me

  2. Property: Real estate's new moneymaker is not design-driven, it's alternative, Two Sigma building quant tools to hunt real estate bargains[more]

    Real estate's new moneymaker is not design-driven, it's alternative From Forbes: There has been a recent shift of attention in the real estate market as to the types of investments which make the strongest returns. In the past, it's always been a combination of good design, prim

  3. PE/VC: Private equity GPs, LPs alike working on diversity and inclusion, Chinese regulator vows to crack down on private equity, venture capital funds, The VC playbook for portfolio companies: learning from the Covid-19 crisis[more]

    Private equity GPs, LPs alike working on diversity and inclusion From Private equity general partners and limited partners are doing more to increase diversity in private markets, according to a report released Tuesday by the Institutional Limited Partners Association.

  4. PE/VC: Private equity continues to lead fund closings, Venture capital firms are fighting to throw money at cleantech[more]

    Private equity continues to lead fund closings From Among private fund closings, private equity funds have led the pack starting in 2011, based on data collected by Pensions & Investments. During those years, private equity's share has ranged from 56% to 72% of the total

  5. PE/VC: Climate tech is hot, but VCs can't forget about water, Five top trusts to tap into the private equity boom[more]

    Climate tech is hot, but VCs can't forget about water From Crunch Base: "It is unequivocal that human influence has warmed the atmosphere, oceans, and land." These fiery words come from the latest landmark U.N. report detailing intensifying, universal climate change impacts. They cover