10 APR

2014

Research Paper , Resources

The end of cheap money?

Executive Summary

The financial crises of the past seven years created significant shifts in the financial markets. Long gone are the days of low risk sovereign bonds. The US and European governments have been downgraded. Bank-bailouts rewrote the traditional order and how investors and regulators treat the financial sector. New regulations, on-going volatility and continued deleveraging trends have forced both borrowers and institutional investors to reconsider their options.

As interest rates have been consistently pushed down since 2008 to keep the global economy going, investors’ hunger for yield has grown stronger than ever and turned bond markets upside down with huge flows into corporate bonds, pushing down spreads. But with Janet Yellen tapering the Fed’s Quantitative Easing programme and UK’s Mark Carney pondering whether interest rates should rise, much of the world is now shifting from unconventional policies that softened the effects of the crisis, towards the end of cheap money.

With rates bottoming out and corporate spreads having normalised, the great bull-run in bonds seems over. Investors need to become more discriminating and more daring in their fixed income investment decisions.

This paper addresses how investors can best navigate through the new fixed income era by focusing on High Yield corporate credit. It also details which strategies and tools are best adapted to benefit from credit opportunities and manage risk.

Table of content

THE END OF THE LOW INTEREST RATE ERA
Seven years of cheap money are coming to an end. Investors must prepare

NEW FIXED INCOME STRATEGIES REQUIRED
Maintaining income streams whilst protecting capital remains a delicate balancing act

HIGH YIELD – MANY OPPORTUNITIES FOR 2014
Deepening and expansion of the High Yield market: offering greater portfolio diversification

THE RIGHT TOOLS FOR THE RIGHT JOB
Long on opportunities, short on poor value

ABOUT CANDRIAM INVESTORS GROUP


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