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Congress has effectively “kicked the can down the road” by raising the statutory debt limit sufficiently to meet Treasury obligations until December 3. This is by no means a solution to the problem, but rather just delays the inevitable uncertainty related to the debt “ceiling” drama that is likely to build as December approaches.
US Treasury bills (T-bills) are continuing to react to the ongoing uncertainty. Notably, we have observed a noticeable “cheapening” of T-bills scheduled to mature in December, creating a “hump” in the T-bill yield curve that moderates in late December and into January (Figure 1). In our view, this turn of events does not present an opportunity for bond investors to reach for incremental yield, as we believe they should instead be focused on preserving liquidity through their T-bill allocation.
Treasury market jitters
In anticipation of the possibility of a technical debt default by the US government, T-bills with maturities falling shortly after the new December 3 deadline to raise the debt limit are commanding a…
Japanese stocks have been decidedly out of favor with most investors for several years now, underperforming most recently in response to the 2020 COVID-19 crisis and Japan’s delayed economic recovery from it this year. (For more on that and related equity opportunities in Japan these days, please see Revisiting Japan from a contrarian perspective, co-authored by my colleagues, Jun Oh and Takuma Kamimura.)
Meanwhile, on a more upbeat note, the trend toward Japanese corporate governance reform is steadily proceeding apace. With Japan’s revised Corporate Governance Code calling for further improvements to the functioning of corporate boards of directors, as well as strategies for addressing global climate change, Japanese equity returns to shareholders have in many cases rebounded lately amid stronger business performances. This is an encouraging development that we broadly expect to…
Last week, a blog post titled Fixed income investors warily eye Congress and the Fed discussed three likely government policy drivers of fixed income markets in the period ahead — US monetary policy, US fiscal policy, and the US debt ceiling. Here, we’ll take the next step of briefly highlighting some fixed income market sectors where investors might turn for attractive total return opportunities in today’s challenging environment. Indeed, it’s perhaps the most pressing question many fixed income clients have been asking lately.
A supportive US policy backdrop
The prevailing US monetary and fiscal policy backdrop continues to be broadly supportive of credit fundamentals, but many credit sectors are not currently…
Four climate specialists, including Director of Climate Research Chris Goolgasian, discuss where they perceive market wrong-headedness on climate change. Learn how they look beyond consensus to uncover climate-related opportunities for our clients.
It’s a common question that’s been hovering over the global investment landscape in recent days. In a word, I feel confident the answer is “no.” And a related question: Can China overcome its longer-term debt and capacity problems? I think the answer there is probably “yes,” if given enough time. Let’s have a closer look at this still-evolving situation.
My overarching conclusion: This is not China’s Lehman
The recent high-profile debt woes of China’s second-largest property developer have riled global markets and sparked widespread fears of a brewing systemic crisis that could spread from China to the US and the rest of the world. I suspect those concerns are overblown and largely unfounded. In fact, I believe the risk of a systemic Chinese crisis with contagion potential is…
