3 Things The European Investment-Grade Fixed Income Team Talked About Last Week

Stationary Viewer1. ECB’s Corporate Bond Buying Programme

At its regular meeting last week, the Governing Council of the ECB released the technical parameters of the Corporate Sector Purchase Programme (“CSPP”), which was initially announced during the 10 March 2016 meeting. In short, the programme will:

  • Involve bonds issued in Euro by Eurozone or non-Eurozone (but where the issuing entity is incorporated in the Euro-area) domiciled non-banking issuers,
  • Target maturities from 6 months up to 30 years,
  • Involve Securities a minimum rating of BBB- (using the best-of-rating methodology in case of split ratings),
  • Start towards the end of Q2 2016, contributing to the monthly Euro 80bn Quantitative Easing programme already in place,
  • Be made on both the primary and secondary markets, and
  • Be made according to the sector and countries weightings of a market-cap based benchmark to be identified by the ECB.

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The Potential of Liquid Alternative Strategies

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“Liquid alternatives” is a term increasingly used in the financial field. Hugh Prendergast, Head of Strategic Product and Marketing at Pioneer Investments, explains how liquid alternatives can offer enhanced diversification, reduce directionality and increase the potential for truly uncorrelated alpha[1]


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Geopolitical Trends Shaping the Investment Landscape Part 4

Middle East connectionsWe are pleased to welcome once again Dr. Robert Wescott, President of Keybridge Research and a long-time adviser to Pioneer, as a guest contributor. Dr. Wescott  attended our recent Macro Advisory Forum, chaired by Giordano Lombardo, CEO and Group CIO, discussing how geopolitical risks could shape the investment landscape.

In the fourth of this series of blogs, Dr. Wescott looks at what is happening in the Middle East. Continue reading

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3 Things The European Investment-Grade Fixed Income Team Talked About Last Week

1748473891. Japan – Negative Rates but Currency Strength

Economic textbooks tell us that lowering interest rates should lead to a weaker currency. That was probably what Bank of Japan Governor Haruhiko Kuroda expected when he introduced negative deposit rates in Japan in late January 2016. But in the intervening period, the Yen has actually strengthened – by over 9% against the U.S. Dollar for example, leaving most of the market scratching their heads as to the reason. As sometimes happens in the FX market, the reasons aren’t totally clear-cut, but we do know a few things. The introduction of “Abenomics” was meant to weaken the Yen, giving a boost to Japan’s export sector. Many overseas investors bought Japanese assets (especially equities), and hedged their Yen exposure. Now, however, with the Nikkei 225 having fallen and the Yen strengthened, investors appear to be cutting those positions and closing their Yen hedges, putting further upward pressure on the currency. Real yields (the difference between nominal yields and the inflation rate) have also moved in the Yen’s favour, mainly due to U.S. real yields falling – the spread between U.S. real yields and Japanese real yields has halved since early 2016. Plus many estimates of fair value for U.S. Dollar/Japanese Yen are still lower than current levels, with some models even suggesting that fair value is below 100. Finally, it’s worth mentioning that Japan’s February current account surplus was its highest in a year, and a current account surplus is usually good for a currency. There was increased talk last week of intervention by the Bank of Japan, but we think it unlikely in the near-term. Still, after such a large move, we think it wise to look for opportunities to short the Yen. Continue reading

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Geopolitical Trends Shaping the Investment Landscape Part 3

heat wave in the city and hand showing thermometer

We are pleased to welcome once again Dr. Robert Wescott, President of Keybridge Research and a long-time adviser to Pioneer, as a guest contributor. Dr. Wescott  attended our recent Macro Advisory Forum, chaired by Giordano Lombardo, CEO and Group CIO, discussing how geopolitical risks could shape the investment landscape.

In the third of this series of blogs, Dr. Wescott looks at Climate Change: Could it be the new endgame?

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