Corporate Bonds – Page 2 – Harlyn Research LLP

Simple Explanation

Thursday, November 15th, 2018

Industrials are weak in both equity and credit models

Weakness in US Industrials can often be a signal that we are close to a period of market disruption. That signal is flashing yellow, as are the signals from other equity regions such as the UK, the Eurozone and Japan. We have red flags on Industrials across all of our credit models. We don’t have a clear and obvious cause yet, but the simplest explanation could be that we are closer to a significant slowdown than consensus thinks.

Filed under: Categories: Corporate Bonds, Industrials, Market dislocation, Sector Strategy, United States

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Three Unrelated Ideas

Saturday, July 14th, 2018

Japanese Equities, US High Yield and Healthcare

Our models suggest that investors have decided to use Japanese rather than Eurozone Equities, as a way of funding their increased exposure to US Equities. US High Yield may be about to lose its #1 position in fixed income. Healthcare is about to be upgraded to overweight in the US and Europe. It is largely unaffected by the threat of a trade-war.

Filed under: Categories: Corporate Bonds, Global Equities, Healthcare, Sector Strategy

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Some Relief at Last

Wednesday, June 13th, 2018

US Treasuries may bounce in Q3

The risk-adjusted returns of all parts of the US Treasury curve are set to improve over the summer. Our models suggest that investors may be revising down their estimates of the size and scope of future rate hikes from the Fed as evidence mounts of a slowdown in Emerging Markets. This would be consistent with a further flattening of the yield curve and less pressure on spreads in Investment Grade. High Yield already offers the best risk-adjusted returns in US credit. The wild card remains EM Sovereigns; contagion is a real risk, and credit quality may not be an adequate defence.

Filed under: Categories: Corporate Bonds, Government Bonds, Yield curve

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If You Have to Own Bonds…

Wednesday, January 24th, 2018

This is how to trade them

All our tactical asset allocation models are close to maximum underweight in fixed income. If you have to have some exposure, our models are clear that the best overall strategy is momentum with a bias towards risk-aversion. Other strategies tend to lead to lower returns and larger drawdowns over the long term.

Filed under: Categories: Corporate Bonds, Government Bonds, Momentum vs mean reversion

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Credit Quality Concerns

Wednesday, June 14th, 2017

Contagion threat to Investment Grade

While newspapers are fretting about the valuation of Technology stocks, our models suggest that there is a growing problem with US High Yield credit. This is not confined to the Energy sector and may soon impact US Investment Grade. Our previous note highlighted the importance of Investment Grade as an end of cycle indicator.

Filed under: Categories: Corporate Bonds, Credit Quality, Energy Prices

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A Warning from History

Wednesday, June 7th, 2017

High exposure to Euro Equities can be dangerous

There is a lot of concern that the ultra-low level of volatility may herald the death of the global equity bull market. But historically this has been a poor indicator (as have Tech bubbles). Two which have worked in the past are very low exposure to US investment grade credit and very high exposure to Eurozone Equities, both of which we have now. But the lead-time from here could be between 10-30 weeks.

Filed under: Categories: Corporate Bonds, Correction, Eurozone

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Mind the Gap

Wednesday, September 28th, 2016

Eurozone bullishness not matched by the US

When Eurozone investors are a lot more bullish about global equities than their US counterparts, we start to get nervous. There are structural reasons for this behaviour, but it can be a sign that a correction in equity markets is on the way.

Filed under: Categories: Corporate Bonds, Correction, Dividends, Eurozone, Risk-Adjusted Returns, United States

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Catastrophically Awful

Wednesday, July 13th, 2016

Eurozone banks are in crisis NOW

The scores for the Financials sector in our Eurozone and Pan-European equity models are catastrophically awful – as bad as those for US Financials at the onset of the Lehmans crisis. The only possible conclusion is that the Eurozone financial crisis has already begun. The three large banks with the worst individual scores are Unicredit, Intesa and Deutsche Bank.

Filed under: Categories: Corporate Bonds, Credit Quality, Equities, Eurozone Crisis, Financials

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