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Allianz Global Investors, a major European asset manager, is purchasing UK government bonds due to the belief that the Bank of England may increase the rate of interest-rate cuts as the economy slows down. Although the central bank is expected to keep rates steady in the upcoming week, the market could soon anticipate more aggressive easing. Recent data indicating a slowdown in growth and a decrease in pay growth have led to a change in the narrative, with the market currently pricing in around 100 basis points of rate cuts by the end of the first quarter next year. Allianz GI has started buying 10-year gilts against German bonds and expects the yield spread to tighten over the medium term. [Extracted from the article]

Sales of Australian dollar bonds have reached a yearly record, driven by increased demand from Asian investors. Issuance by corporate borrowers and local governments has surpassed the previous full-year record, with Asian investors accounting for about 30% to 40% of demand for some notes. The lower interest rates in Australia compared to the United States, as well as the potential for higher yields, have attracted foreign issuers. While the upcoming US election and differences in benchmark interest rates may affect the pace of issuance, experts believe that the Australian dollar credit market will remain larger than in the past. [Extracted from the article]

According to analysts, the recent rally of the yuan may not continue due to China's economic struggles, which could discourage the repatriation of dollar holdings following the Federal Reserve's rate cut. The focus has been on Chinese companies' foreign-asset holdings, with expectations that lower US interest rates would bring some of those investments back to China. However, skepticism is growing about the extent of this unwind, given China's economic woes, the risk of higher tariffs, and the yield gap with the US. The outcome of the US election and the policies of the candidates will also play a role in the yuan's future. [Extracted from the article]

European banks have had their busiest week of issuing Additional Tier 1 (AT1) bonds since the global financial crisis. This week, they raised €7.1 billion ($7.9 billion) of capital, surpassing all previous weekly records. The rush to lock in yields comes as investors anticipate interest rate cuts by the Federal Reserve. Alpha Bank SA's holding company was one of the issuers this week, receiving nine times more orders than the amount it raised and reducing its cost of capital compared to its previous issuance. AT1 bonds, also known as contingent convertible or CoCo bonds, were introduced after the financial crisis to prevent taxpayer-funded bailouts. Yields in AT1 bonds are currently near their lowest level in over two years, and the market is expected to have double-digit returns this year. [Extracted from the article]

European banks have had their busiest week of issuing Additional Tier 1 (AT1) bonds since the global financial crisis. This week, they raised €7.1 billion ($7.9 billion) of capital, surpassing all previous weekly records. The increase in supply is due to investors rushing to lock in yields in anticipation of interest rate cuts by the Federal Reserve. AT1 bonds, also known as contingent convertible or CoCo bonds, were introduced after the financial crisis to ensure bondholders take losses instead of relying on taxpayer-funded bailouts. Yields in AT1 bonds are currently near their lowest level in over two years, and the market is expected to have double-digit returns this year. [Extracted from the article]

A record number of blue-chip companies in the US are selling bonds, with 11 more companies planning to do so. This follows nearly 50 companies, including Uber, selling a combined $71.9 billion worth of new bonds earlier in the week, the highest two-day new issuance volume on record. Companies are taking advantage of low borrowing costs and strong investor demand, but this may change as the Federal Reserve is expected to cut interest rates and investors work through recent issuance. Despite the high volume of bonds being sold, demand remains strong and investors are well-prepared for the rush of new deals. [Extracted from the article]

Focus Financial Partners has relaunched a $3.65 billion leveraged loan package that was previously pulled due to market volatility. The deal, led by Royal Bank of Canada, consists of a $3.3 billion term loan and a $325 million delayed-draw term loan. The proceeds will be used to refinance debt and pay a shareholder distribution for Focus Financial, a wealth management firm. This relaunch comes as companies are rushing to sell bonds and loans ahead of the US presidential election. The pricing on the relaunched deal is being discussed at 3 to 3.25 percentage points over the benchmark rate. [Extracted from the article]

According to Pacific Investment Management Co. (Pimco), the higher borrowing costs that France is currently experiencing compared to Germany are likely to continue. This is due to ongoing political uncertainty and budget concerns following President Emmanuel Macron's snap election in June. Pimco warns that the next French government is expected to be weak and will face tough negotiations with the European Commission. While French borrowing costs may drop in the coming months as the European Central Bank cuts rates, they are predicted to remain higher than German bond yields in 2025. Despite these challenges, Pimco believes that the risk of another sovereign debt crisis in the region is low. [Extracted from the article]

According to Pacific Investment Management Co. (Pimco), the higher borrowing costs that France is currently experiencing are likely to continue. The yield spread between French bonds and German debt is around 70 basis points due to political uncertainty and budget concerns since President Emmanuel Macron's snap election in June. Pimco warns that the next French government will be weak and face challenging budget negotiations with the European Commission in the fall. While French borrowing costs may drop in the coming months, they are expected to remain higher than German bonds in 2025. Despite these challenges, Pimco believes that another sovereign debt crisis in the region is unlikely. [Extracted from the article]

Researchers from Gachon University in South Korea have published a report examining the dynamics of credit risk connectedness among major sectors in Asia, Europe, and North America. The study found significant credit risk spillovers between sectors, indicating the influence of economic factors on the transmission of credit risk shocks. Notable findings include increased credit risk connectedness for Asian banks during the global financial crisis, high connectedness levels for European manufacturing sectors during both the global financial crisis and the COVID-19 pandemic, and a surge in North American banks due to the collapse of Silicon Valley Banks. The research has practical implications for policymakers and portfolio managers in assessing the effectiveness of policies and hedging credit risk. [Extracted from the article]

A study conducted by researchers at Zhejiang Gongshang University in Hangzhou, China, analyzed the relationship between the US yield curve spread, the US dollar, and gold prices from January 2000 to July 2023. The study used the Quantile-on-Quantile Connectedness approach and found that inversely related quantiles showed higher average total connectedness than directly related quantiles. The researchers also noted that this quantile-based connectedness varied over time, indicating a dynamic relationship between these variables. The study has been peer-reviewed and published in The North American Journal of Economics and Finance. For more information, readers can contact Jia Linyu at Zhejiang Gongshang University. [Extracted from the article]

The article explores the concept of the Credit Commons, which aims to unite global groups involved in building the commons economy. The Credit Commons Protocol serves as a ledger for tracking exchanges and enables the implementation and scaling up of mutual credit schemes while maintaining local autonomy. Community engagement and co-design are emphasized in the implementation of the Credit Commons. The article also discusses credit clearing, which can enhance local trade efficiency by eliminating delays and late payments, and liquidity injection, which targets payments to eliminate unresolvable debt. The long-term goal is to establish a Credit Commons system applicable to various sectors and connect different networks worldwide, with the Credit Commons Society developing governance principles for these systems. [Extracted from the article]

The Bank of Israel has decided to maintain its benchmark interest rate at 4.5% and expects to continue doing so for the remainder of the year. The ongoing conflict in Gaza has influenced this decision, as it has slowed economic growth and contributed to inflation exceeding the target range. Market analysts predict that inflation will rise to 3.5% by January, and it may take until the end of next year for it to return to the target range of 1-3%. The conflict has also led to increased geopolitical uncertainty and economic ramifications, impacting the yield spreads between Israeli and US government bonds. The central bank governor has expressed concerns about fiscal policy and the need for budgetary cuts to balance defense expenditures. However, discussions on the 2025 budget have been delayed, which could negatively affect investor confidence. Israel's deficit and debt-to-GDP ratio have increased, and the lack of adjustments to reduce the deficit may hinder the return of inflation to its target. The economy has experienced a slowdown, with GDP growth at 2% due to supply limitations and the impact of the conflict on the construction industry and military mobilization. Despite these challenges, the economy remains robust, with private consumption holding steady and a tight labor market. [Extracted from the article]

According to UBS Group AG, the outcome of the US presidential election is likely to have a sector-level impact on credit markets rather than a macro one. A democratic victory would be supportive for basic industry, capital goods, and utilities sectors, but negative for telecoms, technology, banks, and autos. The report suggests that a new president will impact individual sectors based on policy actions, with basic industry, capital goods, and utilities sectors expected to outperform due to the likelihood of preserving the Inflation Reduction Act and other Biden-era stimulus policies. On the other hand, tech, telecoms, and banks would underperform due to higher regulatory scrutiny, and autos would underperform due to the adoption of electric vehicles and softer defense of US manufacturers from imports. The report also states that credit spreads tend to tighten in the three months leading up to the election, with a Democratic victory typically being better for spreads than a Republican one. In the speculative-grade sector, there may be a "more negative skew" toward energy, autos, and aerospace/defense sectors in the event of a Harris victory. [Extracted from the article]

Foreign investors have been pouring money into Indonesian sovereign bonds, with $2.2 billion invested in August, the highest amount since January 2023. This surge in demand is driven by the prospect of a Federal Reserve rate cut and the appeal of Asian bonds over US Treasuries. Indonesia's improving government finances and higher returns have also attracted investors. However, foreign fund holdings of Indonesian debt are still below historical levels compared to other regional peers. The optimism surrounding Indonesian bonds is evident in recent bond offerings, and the demand for Indonesia's dollar bonds has also been strong. [Extracted from the article]

Mexico has successfully raised $1.05 billion through the sale of Samurai bonds in Japan. The bonds were sold in five tranches, with the three-year notes accounting for the majority of the total size. This demonstrates that there is investor demand in Japan for riskier debt, particularly for shorter-dated tenors. Mexico aims to diversify its overseas debt sources and plans to use the funds raised for projects related to United Nations Sustainable Development Goals. The buyers of the bonds included city banks, life insurers, asset management firms, and domestic and foreign corporations. [Extracted from the article]

Mexico has successfully issued a Samurai bond, raising ¥152.2 billion ($1.05 billion) in five tranches, including 10-year notes at a spread of 140 basis points. This demonstrates that there is investor demand in Japan for riskier debt, despite increased costs. Mexico aims to diversify its overseas debt sources and plans to use the funds raised for projects related to the United Nations Sustainable Development Goals. The previous issuance of yen bonds by Mexico was in 2022, and the country's 10-year yen notes issued in that year are currently trading at around 162 basis points. [Extracted from the article]

Harley-Davidson Inc. has decided to drop its diversity, equity, and inclusion (DEI) initiatives following pressure from an anti-DEI activist. The company no longer has minority-owned supplier spending goals, will discontinue socially-motivated training for employees, and has made other changes to distance itself from diversity programs. This move by Harley-Davidson is part of a larger trend of companies re-evaluating their DEI policies in response to backlash against corporate DEI. The decision was influenced by a social media campaign led by activist Robby Starbuck, who believes that corporations should focus on neutrality and sanity rather than DEI policies. [Extracted from the article]

Harley-Davidson has decided to drop its diversity, equity, and inclusion (DEI) initiatives after facing pressure from an anti-DEI activist. The company no longer has minority-owned supplier spending goals, will discontinue socially-motivated training for employees, and has made other changes to distance itself from diversity programs. This move follows similar actions by Tractor Supply Co., Deere & Co., and Polaris Inc., as part of a broader backlash against corporate DEI. While some support DEI programs, others believe that companies should remain neutral on current events. The activist behind the campaign has already chosen their next target, which they describe as having a "very conservative" customer base. [Extracted from the article]

The stock and bond markets are sending conflicting signals about the possibility of a US recession, leading some investors to believe that there is too much complacency in the credit market. While the VIX, or "fear gauge," reached its highest level since the start of the pandemic, credit spreads remained below historical averages. Some investors, including Boaz Weinstein of Saba Capital Management and Brian Gelfand of TCW Group, argue that bond investors are not adequately pricing in economic risks. However, others believe that recent economic data is just a temporary setback and that the Federal Reserve will be able to manage inflation and avoid a recession. The debate continues as to which metric is more accurate in assessing the state of the economy. [Extracted from the article]

SulAmerica Investimentos, the asset-management arm of a major Brazilian insurance company, is planning to launch its first private-credit fund focused on project financing. This move comes as returns for traditional funds shrink due to decreasing spreads for local bonds. Private-credit funds are gaining popularity in Brazil, with investors shifting from underperforming hedge and equity funds. The industry raised a net 163.5 billion reais ($29 billion) in the first half of this year. SulAmerica's private-credit funds have grown to 23 billion reais in assets under management, and the firm's total assets under management across all strategies reached 76.2 billion reais. [Extracted from the article]

Brookfield Asset Management Ltd. has reported that its assets under management have reached approximately $1 trillion, a record high. However, the company's profit for the second quarter fell short of analysts' expectations. Brookfield calculates its assets differently from other asset managers, including the full enterprise value of companies it holds stakes in, even if it doesn't fully own the company. The company expects deal activity to increase and plans to pursue large-scale transactions and monetize some of its investments in the second half of the year. [Extracted from the article]

Brookfield Asset Management Ltd. has reported that its assets under management have reached approximately $1 trillion, a record high. The company's profit for the second quarter increased from the previous year but fell short of analysts' expectations. Despite a 7% drop in revenue, the firm cited momentum in its credit business and opportunities in renewable power and transition business as contributing factors to its success. Brookfield expects deal activity to increase and plans to pursue large-scale transactions and monetize investments in the second half of the year. The company also acquired a 5% stake in Oaktree Capital Management and made several other deals during the quarter. [Extracted from the article]

Focus Financial Partners has postponed a $3.65 billion term-loan package, making it the third leveraged-loan deal to be delayed this week due to global market volatility. The deal, led by Royal Bank of Canada, was intended to refinance an existing loan and provide funds for shareholder distribution. This comes as leveraged loans, previously a top-performing debt class, experienced significant price declines. SeaWorld Parks & Entertainment Inc. and SBA Communications Corp. also postponed planned term loans on Monday. [Extracted from the article]

The rally in European credit risk this year has been erased as traders rush to protect themselves from a widespread selloff in various asset classes. Indexes tracking credit default swaps for investment grade and junk borrowers in Europe have surged to their highest levels since late 2023. Similar gauges in Asia have also risen, and yield premiums for high-grade dollar bonds in the region are set for their largest surge in 22 months. Traders are concerned about a potential recession in the US and uncertainty stemming from the Middle East. However, some experts believe that the current risk-off in credit will subside, as credit metrics and quality remain solid and central banks are expected to intervene. [Extracted from the article]

Asian traders are expecting a positive day for stocks in the region following gains on Wall Street, after Federal Reserve Chair Jerome Powell hinted at potential interest rate cuts in September. This prospect of easing by the Fed is also expected to benefit regional currencies, as it weighs on the US dollar. Market participants have varying views on the currency outlook, with some predicting gains for Asian currencies against the US dollar in the short term. Additionally, the easing outlook is expected to bolster stocks in Japan, Taiwan, and South Korea, particularly in the tech sector. [Extracted from the article]

The yen experienced a gain after the Bank of Japan (BOJ) rate hike and Governor Kazuo Ueda's press conference, according to analysts and strategists. European traders are purchasing the yen against the dollar, and the yen is expected to test the 150-yen level due to the BOJ's pressure on the currency. The rate hike by the BOJ was seen as preemptive and reflects their increased confidence in the economy and inflation. There may be another interest-rate hike by the BOJ in the near future, which could lead to higher credit spreads and a decrease in demand for corporate bond investment. The BOJ's decision was seen as mixed and did not significantly exceed market expectations. [Extracted from the article]

The Bank of Japan's decision to raise interest rates and cut bond purchases has led to mixed outcomes for the yen, according to analysts and strategists. The focus now shifts to BOJ Governor Kazuo Ueda's press conference and the Federal Reserve policy decision in the US. Market participants are relieved by the BOJ's reduction in bond purchases, but the pace can still be adjusted later this year. The yen is expected to weaken if Ueda suggests no more rate hikes this year, while a rate hike to 0.5% would make investors more nervous. The BOJ's decision does not significantly exceed market expectations. [Extracted from the article]

The UK commercial property market experienced a significant correction due to a sharp increase in interest rates, leading to a drop in capital values in the logistics sector. However, there is now evidence that UK logistics values have stabilized and may be starting to recover, presenting an opportunity to acquire assets at a discount. Although logistics assets are attractively priced, this window of opportunity may not last as capital and debt markets improve. As the market stabilizes, buyers are expected to return, increasing competition. Despite short-term challenges, investing in UK logistics is seen as an exciting opportunity with potential rewards for those with market knowledge and connections. [Extracted from the article]

French business confidence has dropped to its lowest level since the Covid pandemic due to the uncertainty caused by snap elections. The monthly gauge fell five points to 94, lower than economists' expectations. The survey was conducted between June 27 and July 22, covering the two rounds of voting and the immediate aftermath. The prospect of a radical shift in economic and fiscal policy during the election campaign spooked financial markets, leading to a decrease in business confidence. However, economists predict that business confidence will rebound in August with the formation of a technocratic or centrist government. [Extracted from the article]

New Zealand's yield curve, which had been inverted, has now steepened as the country's central bank moves closer to cutting interest rates. The spread between 10-year bond yields and two-year yields has turned positive, indicating a possible policy easing. This comes as shorter duration notes have rallied, while longer-dated debt is expected to underperform due to government refinancing. The Reserve Bank of New Zealand may cut rates as early as August due to a sluggish economy and slowing inflation. However, experts caution that the process may be gradual and the slope of the curve could remain positive next year. [Extracted from the article]

Investors are becoming more selective when it comes to emerging-market corporate bonds, as they anticipate a volatile second half of the year. Money managers are recommending high-yield, dollar-denominated bonds from emerging-market firms due to their shorter durations and higher credit quality compared to their host nations. Despite uncertainty surrounding the Federal Reserve's interest rate decisions and the US presidential election, emerging-market corporate bonds have outperformed sovereign bonds this year. Credit quality has also improved, leading to a decline in default rates. Investors are particularly interested in Latin America, with Mexico and Brazil being favored. [Extracted from the article]

The prospect of an interest-rate cut in the Philippines is causing a rally in the nation's bonds, putting them ahead of Indonesia's as investors focus on monetary policy outlooks. The benchmark 10-year Philippine bond yield has decreased since May, while the Indonesian equivalent has remained high, widening the gap between the two. The yields are expected to continue diverging as the Bangko Sentral ng Pilipinas prepares for a rate cut, while concerns about the fiscal deficit and currency weigh on Indonesian bonds. The near-term outlook for peso bonds is becoming more favorable as inflation decreases. [Extracted from the article]

France is facing bond-market risk due to a political shock that has brought attention to the nation's fiscal deficit. Previously, investors overlooked France's poor public finances due to its position within the euro area. However, President Emmanuel Macron's decision to call snap elections and the resulting hung parliament have raised concerns about political stability and the ability to drive economic reforms. The yield premium on French bonds over German securities has widened, indicating increased risk. Moody's Ratings has warned of a potential negative outlook on France's credit assessment. The situation in France highlights the fragility of bond markets globally, with rising debt levels and populist parties gaining support. [Extracted from the article]

France's fiscal deficit is becoming a pressing issue for bond investors, challenging the perception that the country's poor public finances are not a significant concern. President Emmanuel Macron's decision to call snap elections has raised doubts about France's political stability and eroded confidence in his pro-business policies. With a hung parliament resulting from the elections, it will be difficult for any new French government to implement economic reforms or find common ground on fiscal policy. The yield premium on French bonds over German securities has increased, indicating increased risk. This political uncertainty in France is part of a larger global trend of rising sovereign debt and the growing popularity of populist parties advocating for increased borrowing. [Extracted from the article]

French stocks rose as investors found comfort in the political gridlock following the French elections. The lack of a clear winner means that major policy changes are unlikely, easing concerns for investors. While there is still worry over the country's debt burden, the tightening of benchmark bond spreads suggests that the far right and far left are unlikely to implement their big spending plans. The left-wing alliance will have a presence in the lower house but lacks an absolute majority, limiting its ability to make significant changes. A hung parliament is seen as a positive outcome for investors. [Extracted from the article]

According to a simulation conducted by the quant team at investment bank Jefferies, France's far-right National Rally is unlikely to secure an absolute majority in the lower house of parliament or enough seats to form a government. This prediction takes into account the withdrawal of candidates by President Emmanuel Macron's centrist group and the left-wing New Popular Front alliance in order to prevent vote splitting against Marine Le Pen's Rassemblement National. The Jefferies strategists believe that this outcome would have a positive impact on financial markets, particularly by narrowing the yield spread between French and German sovereign debt. However, they also note that a fractured parliament resulting from this scenario is unlikely to effectively address the country's budgetary deficit or debt. [Extracted from the article]

French bonds have gained as political parties in France are reportedly taking steps to prevent the far-right from gaining an absolute majority in the second-round vote. This has led to a decrease in the nation's 10-year yield premium over German peers. Reports suggest that candidates from President Emmanuel Macron's centrist alliance and the left-wing New Popular Front will step aside to limit the power of Marine Le Pen's far-right National Rally. However, there is still concern that a majority for the far right is possible. [Extracted from the article]

According to a note from Morgan Stanley, the possibility of a Trump presidential victory is leading to increased interest in curve steepeners as growth is expected to slow and inflation to rise. The recent US presidential debate has strengthened the likelihood of Trump's re-election, which has caused bond traders to widen the yield gap between two and 10-year notes. The strategists at Morgan Stanley recommend betting on a wider yield spread between these Treasury notes. Other analysts, such as those at Barclays and Nomura Securities, have also provided recommendations for investors in response to the potential outcome of a Trump victory. [Extracted from the article]

Investors initially reacted positively to Marine Le Pen's National Rally party's smaller-than-expected victory in the first round of France's snap parliamentary elections. However, concerns are growing about the potential for a government led by the National Rally or the left-wing New Popular Front to pursue expansive fiscal policies, which could worsen France's budget deficit. Traders are questioning whether prices can continue to rise in the face of political turmoil and the potential for the far right to come to power. The outcome of the second round and the formation of alliances to block Le Pen will likely determine the future direction of French markets. [Extracted from the article]

French President Emmanuel Macron's centrist alliance and the left-wing New Popular Front are considering withdrawing candidates from the second round of the legislative election to prevent the far-right National Rally, led by Marine Le Pen, from gaining power. Le Pen's party and its allies dominated the first round of voting, but their margin of victory was smaller than expected. The mainstream parties are exploring ways to prevent the National Rally from winning an absolute majority in the second round. The outcome of the election will determine whether Macron will have to share governing responsibilities with Le Pen's group or manage a gridlocked parliament. [Extracted from the article]