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SBI Pension Funds Pvt., which manages $50 billion in assets, is considering investing in corporate and state debt due to the narrowing spreads on longer-maturity Indian government bonds. The fund's chief investment officer, Sandeep Pandey, expressed concern that the lack of term premium for longer-dated securities could impact returns for subscribers. Demand for longer-tenor papers has increased, leading to a compression in the spread between 10-year and 30-year bonds. The fund currently holds a portfolio of about one trillion rupees in corporate paper and 2.5 trillion rupees in sovereign and state debt. [Extracted from the article]

Home Depot Inc. plans to take on $12.5 billion of debt to finance its acquisition of building-products distributor SRS Distribution Inc. The company intends to use cash on hand, as well as new commercial paper and unsecured notes, to fund the deal. The acquisition is valued at approximately $18.25 billion and is expected to be completed in early 2025, pending regulatory approvals. Home Depot aims to maintain its investment-grade ratings and reduce leverage through debt repayment and Ebitda growth. The acquisition aligns with Home Depot's strategy to target professional contractors in the market. [Extracted from the article]

SBI Pension Funds Pvt., which manages $50 billion in assets, is considering investing in corporate and state debt due to the narrowing spreads on longer-maturity Indian government bonds. The demand for longer-tenor papers has increased, leading to a compression in the spread between 10-year and 30-year bonds. The fund is also positioning for a rate cut and expects the central bank to cut interest rates by September. [Extracted from the article]

Bolivia is considering selling up to $1 billion in green bonds in New York this year to finance the mining of lithium, a key component in electric vehicle batteries. The country hopes that by tapping into the demand for clean-energy investments, it can lower borrowing costs to 10% or lower. Bolivia has the world's largest lithium deposits, but extracting it in commercial quantities has been challenging due to high levels of magnesium in the brine and the distance to the nearest port in Chile. Despite political and social unrest and a state-led approach to natural resources, Bolivia's sovereign bonds have performed well this year. However, they still trade at distressed levels. The government believes its outstanding bond schedule is manageable and has demonstrated its willingness to honor obligations. Congress approved a sovereign bond sale last year, but future borrowing may be more difficult due to political divisions within the ruling socialist party. Bolivia narrowly avoided a financial crisis last year by selling half of its gold reserves, and the central bank has nearly depleted its cash reserves. The country's currency peg of 6.9 bolivianos per dollar exists on paper but is not easily accessible in practice. Black market currency traders are offering dollars for more than 8 bolivianos each. Bolivia has low inflation, but economists predict a spike in consumer prices due to the dollar shortage. The government plans to subsidize fuel, electricity, and food to mitigate inflation. [Extracted from the article]

BlackRock, the world's largest asset manager, has stated that investors should rely more on actively managed strategies due to higher interest rates, persistent inflation, and geopolitical risk. They argue that static asset allocations and passive portfolios will not deliver as they have in the past. The analysts emphasize the importance of getting the asset mix right and contend that "mega forces" are keeping interest rates above pre-pandemic levels. While some top executives agree with this perspective, the trend among investors has been to shift away from actively managed funds towards passive products. BlackRock acknowledges that finding skilled portfolio managers can be costly and suggests that budget-constrained investors consider index building blocks instead. [Extracted from the article]

BlackRock, the world's largest asset manager, has stated that investors should rely more on actively managed strategies due to higher interest rates, persistent inflation, and geopolitical risk. They argue that static asset allocations and passive portfolios will not deliver the same returns as in the past. The BlackRock analysts join other top executives in emphasizing the role of active management in current markets. However, they acknowledge that finding skilled portfolio managers can be costly and suggest that budget-constrained investors consider index building blocks instead. [Extracted from the article]

Greece has received record demand for its first new bond since regaining investment grade, with €35 billion ($37.9 billion) in orders for a syndicated sale of 10-year paper. This surge in demand is attributed to speculation that the European Central Bank may lower interest rates in April, prompting investors to seek government bonds. Greece's strong economic growth and ongoing fiscal adjustments have also contributed to the high demand for its bonds. The new Greek bonds also qualify for the ECB's bond-buying program, further attracting investors. [Extracted from the article]

Chinese developer Country Garden Holdings Co. has missed a coupon payment on a yuan bond for the first time, according to anonymous sources. The company is already facing a lawsuit seeking its liquidation offshore. Country Garden had previously defaulted on its dollar debt in October but had managed to avoid defaulting on its local-currency obligations. The company's crisis has deepened as sales have plummeted, and now attention is turning to China Vanke Co., another state-backed builder that is in talks with creditors to avoid default. [Extracted from the article]

The article discusses the increasing difficulty in cracking the risk models behind the best hedge fund strategy of 2023, which is tied to insurance-linked securities, particularly catastrophe bonds. These bonds transfer the risk of large losses from the insurance industry to investors, who can potentially earn significant returns if a catastrophe does not occur. However, calculating catastrophic risk has become more complex due to the growing concentration of property in areas prone to frequent storms, fires, and floods. Models designed to measure cat bond risk are not consistently capturing secondary perils, such as destructive thunderstorms, which are becoming more significant in terms of losses. This has implications for investors who are adding exposure to cat bonds. The article also highlights the increasing importance of secondary perils in climate science and the challenges in modeling these weather events due to the lack of historical data. The shifting pattern of natural perils may deter new capital from entering the cat bond market and cause existing investors to reassess their commitment to cat bonds. [Extracted from the article]

South Africa has announced plans to tap into the central bank's contingency reserves in order to lower the government's debt trajectory and borrowing requirements. This move has led to a strengthening of the rand and a drop in local bond yields. By using funds from the Gold and Foreign Exchange Contingency Reserve Account, the government aims to decrease the amount of debt auctioned at weekly sales and borrow less to fund deficits. However, there are concerns that this decision may leave the country more vulnerable to future shocks. [Extracted from the article]

Kenya plans to raise 70 billion shillings ($429 million) through the sale of infrastructure bonds next month. The bonds will be tax-free and will fund various development projects in the country. The Central Bank of Kenya is expected to announce the offer soon, and the terms of the bond may change. Kenya has previously raised 397 billion shillings through infrastructure bonds to finance projects such as road construction and water supply. The most recent bond auction saw 6.5-year securities sold at 17.9%. [Extracted from the article]

The credit markets have experienced a significant decline at the start of 2024, resulting in the loss of hundreds of billions of dollars in value. The combined value of high-grade and junk markets has decreased by $240 billion to $13.6 trillion, the lowest since December 13. This decline has been exacerbated by the rebalancing of bonds underlying the indexes at the end of last month. Credit-default swap indexes have also seen an increase in spreads, indicating higher credit risk. The reversal of the optimistic sentiment from late 2023 is due to central bankers' reluctance to cut interest rates and concerns about a potential wider conflict in the Middle East. The widening gap between global high-grade bond yields and sovereign debt further highlights doubts about rate cuts. The issuance of new corporate bonds is adding pressure to the market, as portfolio managers may have to sell old bonds to buy new ones. Despite the recent decline, the credit market's value is still higher than it was in late October. The market is expected to remain volatile until central banks confirm expectations of rate cuts. [Extracted from the article]

The credit markets have experienced a significant decline at the start of 2024, resulting in the loss of hundreds of billions of dollars in value. The combined value of high-grade and junk markets has decreased by $240 billion, erasing all gains made since December 13. Credit-default swap indexes have also risen to levels last seen in early December. This reversal of fortune follows the optimism of late 2023, when interest-rate cuts and economic growth were anticipated. However, central bankers are now hesitant to cut rates due to inflation concerns and the potential for a wider conflict in the Middle East. The market is expected to remain volatile until central banks confirm rate cuts. [Extracted from the article]

India plans to sell fewer bonds than initially estimated as the government reins in spending ahead of elections and the inclusion of the nation's debt in global indexes. The finance ministry announced that bonds worth 7.5 trillion rupees ($90 billion) will be sold in the first half of the fiscal year, lower than the 8.5 trillion rupees estimated in a Bloomberg survey. The decision to reduce borrowing is due to the government's desire to avoid sitting on unused cash, according to Finance Secretary TV Somanathan. The sale comes as foreign funds have shown interest in Indian debt ahead of their inclusion in JPMorgan Chase & Co.'s global indexes in June. [Extracted from the article]

Adani Green Energy (AGEL) has priced a $409 million 18-year global green bond offering at a yield of 6.70%. This is the first public bond issuance from the Adani Group since it was accused of accounting fraud by Hindenburg Research in January 2023. The bonds are backed by AGEL's restricted group 1 (RG1), which owns solar assets in India. The orderbook for the bonds was oversubscribed by more than 7 times, with high-quality investors supporting the deal. The proceeds from the bonds will be used to redeem $500 million senior secured notes due in 2024. The potential rating for the bonds is BBB- by Fitch and Ba1 by Moody's. [Extracted from the article]

California plans to sell $2.6 billion of bonds next week, despite the state's budget deficit. The high demand for these tax-exempt bonds is driven by investors looking to shield their income from California's high taxes and lock in yields before anticipated rate cuts by the Federal Reserve. California's bond deals can sell at yields lower than AAA-rated benchmark muni securities, indicating a strong market demand. The sale includes debt to fund various capital projects and will be underwritten by JPMorgan Chase & Co. and Wells Fargo & Co. The budget deficit and potential tax increases at the state and federal levels are factors that investors are willing to overlook in favor of tax-advantaged investments. [Extracted from the article]

China's government bond market is experiencing a resurgence after a brief pause, with the yield on 30-year government bonds approaching its lowest level since 2005. Traders are considering the impact of China's plan to increase the issuance of ultra-long sovereign notes and the possibility of further monetary easing by the central bank. There is speculation that the People's Bank of China may need to lower reserve requirements or implement other easing measures if the nation were to sell ultra-long bonds. The recent data showing slow loan growth in February suggests that the central bank will need to maintain loose liquidity conditions to stimulate credit growth. The yield on 10-year sovereign notes remains steady at 2.28%, near its lowest level since 2002. [Extracted from the article]

A little-known Indian lottery company called Future Gaming and Hotel Services Pvt. was the top buyer of now-banned electoral bonds in India over the past five years. The Election Commission of India recently released the identities of the biggest buyers of these bonds, which allowed individuals or companies to make anonymous donations to political parties. The Supreme Court banned the bonds last month, citing a violation of citizens' right to information. The data released so far does not provide full transparency, as it does not reveal how much each donor gave to which political party. Prime Minister Narendra Modi's Bharatiya Janata Party was the biggest recipient of the donations made via the bonds, earning 47% of the total funds. The Indian National Congress, the main opposition party, received about 11% of the funds. The upcoming elections in India are expected to be one of the most expensive in the world, with political parties set to spend over 1.2 trillion rupees. [Extracted from the article]

State and local government bond yields have reached their lowest levels against Treasuries in nearly three years, indicating a strong demand for tax-exempt securities that has protected them from the bond market selloff. Despite their high valuations, buyers continue to invest in municipal bonds, with deals being oversubscribed by more than five times on average. The demand for tax-exempt income may be driven by the expectation of rising taxes, as President Biden has proposed a budget funded by higher taxes on the wealthy and many states have cut taxes using record surpluses. To see a change in valuations, investors would need to see a shift in the Federal Reserve's rate cuts or a significant increase in issuance. [Extracted from the article]

Chinese developer Country Garden Holdings Co. has missed a coupon payment on a yuan bond for the first time, according to sources. This comes as the company is already facing a lawsuit seeking its liquidation offshore. Country Garden had previously defaulted on its dollar debt in October but had managed to avoid defaulting on its local-currency obligations. The missed payment has caused the company's shares to fall and has added to the pressure for a debt restructuring plan. Additionally, the company's sales have plummeted, further exacerbating its crisis. [Extracted from the article]

Chinese local government financing vehicles (LGFVs) are taking various measures to address their mounting debt and avoid defaulting in public markets. With an estimated total debt of 66 trillion yuan ($9.2 trillion), LGFVs are selling assets, scaling back their expansion plans, and increasingly relying on refinancing options provided by Beijing. The central government has initiated nationwide inspections to assess the debt levels of provincial and city governments. Credit traders are confident that regional governments will prevent bond defaults, leading to robust demand for LGFV bonds and record-low average coupons. LGFVs are also using internal funds, restructuring private debt, and selling assets to generate revenue and repay debts. [Extracted from the article]

Bond investors are calling on European Union leaders to establish a permanent trillion-euro bond program to boost defense spending. These bonds would allow for increased spending to counter Russian aggression without burdening individual member states with more debt. Investors are eager for these bonds because they offer higher yields than similarly rated sovereign bonds. The EU already has outstanding bonds, mostly issued for pandemic recovery, and investors believe that the issuance of EU bonds should become a permanent solution. However, some fiscally conservative countries are skeptical and prefer one-off solutions. The outcome of the situation in Ukraine will likely influence the decision. [Extracted from the article]

Bond investors are calling on European Union leaders to establish a permanent trillion-euro bond program to boost defense spending and counter Russian aggression. These bonds would allow for increased spending without adding more debt to individual member states. Investors are eager for these bonds, as they offer higher yields than similarly rated sovereign bonds. While some countries support the idea, others are skeptical and prefer one-off solutions. The success of the proposal may depend on the outcome of the conflict in Ukraine. [Extracted from the article]

Bond investors are calling on European Union leaders to establish a permanent trillion-euro bond program to boost defense spending. These bonds would allow for increased spending to counter Russian aggression without burdening individual member states with more debt. Investors are eager for these bonds because they offer higher yields than similarly rated sovereign bonds. The EU already has outstanding bonds, mostly issued for pandemic recovery, and investors believe that the issuance of EU bonds should become a permanent fixture. However, some fiscally conservative countries are skeptical of this idea. The success of this proposal may depend on the outcome of the conflict in Ukraine. [Extracted from the article]

The bond market has experienced significant losses since 2021, erasing any extra gains over cash from the past decade. The Bloomberg US Aggregate Index returned 15% to investors in the 10 years through February, compared to 14% in Treasury bills. Staying in T-bills has been more profitable for investors in the past one-, three-, and five-year periods. However, the challenge now is deciding when to move into longer-duration bonds. While cash currently returns more than bonds, switching too late to bonds means missing out on yields that haven't been seen in 17 years. [Extracted from the article]

Pacific Investment Management Co. (Pimco) is warning that the US fiscal deficit could cause the Treasury market to resemble the 1980s, when bond vigilantes demanded higher compensation for holding longer-dated bonds. Pimco argues that a combination of stickier inflation and deteriorating budget estimates could reverse the 40-year downtrend in bond yields. The firm suggests that if term premiums, which represent the extra yield investors seek for holding longer-term debt, return to levels seen in the late 1990s to early 2000s, it could have significant implications for financial markets. Pimco also notes that rising deficits are a concern and that markets act as a disciplining mechanism for governments. [Extracted from the article]

Pacific Investment Management Co. (Pimco) is warning that the US fiscal deficit could cause the Treasury market to resemble the 1980s, when bond vigilantes demanded higher compensation for holding longer-dated bonds. Pimco argues that a combination of stickier inflation and deteriorating budget estimates could reverse the 40-year downtrend in bond yields. The firm suggests that if term premiums, which represent the extra yield investors seek for holding longer-term debt, return to levels seen in the late 1990s to early 2000s, it could have significant implications for financial markets. Pimco also highlights the potential for a steeper yield curve and a correction in the curve as the term premium increases. [Extracted from the article]

BNP Paribas Asset Management has seen a surge in ESG (environmental, social, and governance) clients investing in money market funds due to their stable returns. This comes as the traditional ESG fund market has experienced lackluster returns. BNP AM's assets in money market funds increased by 33% last year, with the majority going into funds that promote ESG goals. The growing popularity of money funds among sustainable investors has sparked a debate about what can be considered ESG. [Extracted from the article]

BNP Paribas Asset Management has seen a surge in ESG (environmental, social, and governance) clients investing in money market funds due to their stable returns. This trend coincides with a decline in the traditional ESG fund market, which has struggled to deliver strong returns. BNP AM's assets in money market funds increased by 33% in 2023, with the majority of new investments going into funds that promote ESG goals. The growing popularity of money market funds among sustainable investors has sparked a debate about what should be considered ESG. [Extracted from the article]

Cisco Systems Inc. is selling $13.5 billion of bonds in the US high-grade debt market to help finance its proposed $28 billion acquisition of Splunk Inc. The bonds are being offered in seven parts, with the longest portion expected to yield 0.90 percentage point above Treasuries. The proceeds will be used for general corporate purposes, including partially financing the Splunk deal. This bond sale by Cisco may lead to other companies, such as Broadcom Inc., Microsoft Corp., and Hewlett Packard Enterprise Co., extending their M&A funding duration. [Extracted from the article]

South Africa has announced that it will tap into its gold and foreign-exchange reserves to reduce its public debt sales. This decision has led to a strengthening of the rand and a drop in local bond yields. The government's move to draw from the central bank will decrease the amount of debt auctioned at weekly sales, providing some relief to local bond markets. However, there are concerns about the potential vulnerability of the country to future shocks by dipping into its reserves. [Extracted from the article]

The prospects for Malaysian sovereign bonds are not looking promising due to a weakening currency and decreasing hedged returns. The declining hedged returns on government bonds are making it less attractive for investors to swap dollars for ringgit. Additionally, the ringgit's drop to a 26-year low against the dollar is discouraging investors from putting money into sovereign securities. Traders also anticipate minimal downside for bond yields after the central bank signaled that it is unlikely to ease policy. Foreign outflows from shorter-term securities are having a greater impact on the ringgit than on the Malaysian bond curve. The rising dollar-ringgit forward points are making it less appealing for dollar-based investors to borrow ringgit. Traders are not expecting significant rate changes from the central bank, unlike in Thailand and South Korea where rate cuts are anticipated. [Extracted from the article]

A research report from Southeast University in Nanjing, China explores the clustering effects and evolution of the global major 10-year government bond market structure. The study uses a graph approach to establish a global major government bond market network and examines the clustering effects of different economies during important global financial events. The research finds that economies in the government bond market network exhibit clustering effects based on geographical proximity and similar yield levels. The study also highlights the centrality of Germany and the Netherlands in the network structure, as well as the close connections between the United States, China, and these two economies. The researchers hope that their interdisciplinary graph network approach will provide an effective perspective for observing and monitoring the global government bond market. [Extracted from the article]

India's Supreme Court has banned the use of anonymous donation instruments called electoral bonds for political fundraising. These bonds allowed individuals or companies to contribute to political parties through a banking channel while keeping their identities anonymous. The court ruled that voters have the right to information necessary for casting their votes, and anonymous contributions could lead to quid pro quo benefits for large corporate donors. The decision is expected to make India's elections more transparent, although there are no restrictions on the overall amount of political funding. The ruling party, Bharatiya Janata Party (BJP), which benefited the most from electoral bonds, may be particularly affected by the verdict. [Extracted from the article]

The US government recently sold $25 billion of 30-year bonds at a lower-than-expected yield, easing concerns about demand for longer-term debt. The auction result briefly caused yields on US Treasuries to retreat from their daily highs before climbing again later in the trading day. Despite uncertainty about when the Federal Reserve will begin cutting interest rates this year, the new bonds found receptive buyers. The auction's success is seen as a positive sign for future bond sales, although the outlook for monetary policy remains uncertain. [Extracted from the article]

The US government recently sold $25 billion of 30-year bonds at a lower-than-expected yield, indicating stronger demand than anticipated. This sale comes after a recent increase in yields, which helped stoke demand for bond sales. The Federal Reserve's plans to cut interest rates this year and into 2025 have also contributed to a positive outlook for bond duration. However, 30-year bond auctions can be less predictable due to the high price-sensitivity of these securities and their investor base. [Extracted from the article]

Treasury yields in the US increased slightly on Thursday, particularly for 30-year bonds, ahead of an upcoming auction of these securities. The rise in yields was influenced by lower-than-expected jobless claims reported by the Labor Department. The auction of $25 billion worth of 30-year bonds is the largest in over two years, and its results are less predictable due to the high price-sensitivity of these long-term securities and their investor base. While recent increases in yields may attract buyers, the auction is not expected to significantly impact US interest rates. [Extracted from the article]

Missed payments on private debt by Chinese local government financing vehicles (LGFVs) are starting to affect their bonds, potentially leading to a downward spiral. When LGFVs fail to pay on debt, bond holders can invoke a cross-protection clause, demanding extra collateral or faster/higher payments. In January, three LGFV bonds triggered the cross-protection clause, highlighting the interconnectedness of LGFVs' debts. While no LGFVs have defaulted on publicly issued bonds, Beijing has introduced measures to restore investor confidence. As of January 23, over 4,000 LGFV bonds, totaling 2.66 trillion yuan, carried the cross-protection clause. [Extracted from the article]

Top Indian fund managers are strategizing on how to position themselves for potential inflows of up to $40 billion in India's bond market. Aditya Birla Sun Life Asset Management prefers government bonds with maturities of seven to 14 years, while Bandhan Asset favors securities that have no investment restrictions for foreigners. SBI Funds Management and ICICI Prudential Asset Management are leaning towards short-term corporate bonds that offer higher spreads over sovereign bonds. These fund managers are anticipating inclusion in global bond indexes to drive returns after the central bank dismissed the possibility of an interest-rate cut. [Extracted from the article]

AQR Capital Management, a prominent investment firm, has adjusted its expectations for bond and equity returns based on their performance in 2023. The firm has increased its projected returns for benchmark debt in the US, UK, Germany, and Japan due to higher yields and falling inflation. Conversely, AQR has lowered its performance outlook for equities, citing rising valuations and diminishing excess returns. The firm's estimates for a traditional 60/40 portfolio remain relatively unchanged. AQR also highlights the growing importance of private credit as an asset class, but acknowledges the uncertainty in predicting its performance. [Extracted from the article]

A recent study conducted by researchers at the Romanian Academy explores the relationship between green bonds and European banks. The study utilizes a cross-quantilogram approach and analyzes data from July 2014 to January 2021. The findings suggest that green bonds have minimal influence on other financial assets, while other financial instruments impact green bonds. The study also indicates that the COVID-19 pandemic has altered the connections between these financial assets. For more information, the full article can be accessed for free at the Energies journal website. [Extracted from the article]

The Nikkei 225 Stock Average in Japan experienced its biggest weekly gain since March 2022, rising 1.5% on Friday and ending the week with a more than 6% advance. The benchmark Topix also climbed for a seventh trading session, reaching 34-year highs. This rally is attributed to a weakening yen, positive expectations for Japanese shares, inflows from foreign investors, a favorable exchange rate, and optimism that deflation in Japan is coming to an end. Chinese investors are also showing interest in Japanese stock exchange-traded funds, and the introduction of tax-free accounts is contributing to the rally. Experts predict that large-cap stocks, high-dividend stocks, and growth stocks with foreign demand will continue to attract buying. The strong performance of Japanese equities in 2023 and the tension between the US and China are expected to draw attention to Japanese equities in 2024. The Nikkei 225 and Topix both had an annual advance of over 25% in 2023, their best performance in a decade. Electric appliances and exporting companies were the main contributors to the Topix on Friday, and Fast Retailing Co. led gains in the Nikkei 225. [Extracted from the article]

Investors are rushing to purchase longer-dated debt in January's bond sales, attracted by the high yields before central banks begin cutting interest rates. Companies like T-Mobile, Berkshire Hathaway Energy's PacifiCorp, and Vonovia SE are finding enthusiastic buyers for their debt, which offers attractive coupons. The demand for longer-dated bonds reflects the expectation of extensive rate cuts, with investors wanting to lock in deals before yields decrease later in the year. However, some investors still prefer shorter maturities in case rate cuts do not happen or are not as steep as expected. [Extracted from the article]

Japanese shares have outperformed other Asian markets, with the Topix index reaching its highest level in 34 years. The Nikkei 225 also reached its highest level since 1990. This strong performance is attributed to a weaker yen, falling bond yields, and bullish investor sentiment. Japanese shares were among the world's best performers in 2023, driven by improved shareholder value, the end of deflation, and a weak yen. However, potential headwinds for Japanese equities include possible changes to the Bank of Japan's monetary policy and yen appreciation. The electric appliances sector was the biggest contributor to gains in the Topix index. Some investors may be turning to Japan due to geopolitical and regulatory uncertainties in China and Taiwan. Wage data showing a slowdown in growth may influence the Bank of Japan's policy decisions. [Extracted from the article]