Corporate bond issuance has slowed over the last few weeks, as we head into the US election on 5 November 2024. Interestingly, there’s still plenty of activity in asset-backed securities.
One corporate bond issue that caught my eye was Judo Bank’s new Tier 2 subordinated bond, issued this week. Tier 2s have been very popular, seen as a marginal increase in risk for a good pick up in yield. The floating rate, sub investment grade BB+ rated issue raised $125 million and was priced at 3-month BBSW + 335 basis points, around 7.75% all up.
Heightened geopolitical risk coupled with climate change related occurrences make for plenty of uncertainty.
Have you heard about catastrophe bonds? The easiest way to think about ‘cat bonds’ is as a type of insurance that transfers the risk of catastrophic events such as hurricanes or earthquakes from insurers and reinsurers to investors. Last week’s gigantic hurricane Milton will impact the market. Martin Rea from Jana Investment Advisors explains the consequences.
Fixed income typically shines in a late cycle slowdown, says Seema Shah of Principal Asset Management. Shah thinks staying in cash is now the leading risk.
We had a tremendous response to the proposed changes to the hybrid/capital note market. So, I reached out to an old colleague, Brad Newcombe from Fixed Income Solutions to get his views. Tune into our latest podcast as we discuss the future of hybrids.
There’s definitely been some spread compression in bond markets and Chris Iggo from AXA AM says that while valuations might be rich, outright yields and income are attractive.
Philip Brown from FIIG Securities has written a very good article explaining yield curves and the returns you get from bonds throughout the term to maturity. This is well worth a read.
Finally, Principal Asset Management released its 4th quarter fixed income report, summarising investment implications for sub sectors and providing a useful table showing year-to-date performance, spread ranges, averages, and yield to worst rates.
Have a good week!
