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Sunday
Jun212015

Did A Butterfly Flap Its Wings In Corporate Bond Markets Last Week?

In this podcast I continue to discussion from last week on corporate bond market bubbles and liquidity, what the risks are, and how worried we should be. I take my point of departure in the decision, last week, by Aberdeen Asset Management to set up a $500M credit line, as a precaution, to fund redemptions from its bond funds. I also give a brief overview, in numbers, of the increase non-financial corporate bonds outstanding since 2007*. 

Articles quoted/used:

The FT Jun 15th 2015, David Oakley - Aberdeen takes safety measures against risk of bonds sell-off

The FT Jun 18th 2015, Robin Wigglesworth - Liquidity pitfalls threaten parched markets

FastFT - Investors flee US junk debt for second week

Notes from the Hedge Jun 17th 2015 - Fund Management CEO Reminds Investors How Funds Are Managed

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* In the podcast I note that corporate debt outstanding was up 47% in the U.S. at the end of 2014, but I don't mention the starting point for this calculation, which is 2007 (SIFMA data). This year is also the starting point for the calculation of a reduction in household leverage of 18%

The intro music is courtesey of the Lino Rise Project at www.fr​ee-int​ro-mus​ic.com. 

Sunday
Jun142015

Stretching monetary policy divergence to an extreme?

In this podcast I discuss the durability of monetary policy divergence between the Fed and, increasingly, the rest of the world. How far can this story be stretched, what narrative will win in the tug-of-war between hawks and doves. Unfortunately, I think it could turn out to be former. Finally, I discuss the case of the evaporating liquidity in bond markets, and why it matters.