The Intelligence Report – 20 November 2017

21 Nov 2017

  • China: fears are overdone on government bonds but beware of onshore corporates – as Chinese government bond yields approach 4%, we review the prospects for Chinese fixed income.
  • Global convertible bonds: this could be their moment – we revisit the case for convertibles against a changing market environment, and prospects for equity positive tax reform in the US.

This week’s two articles are linked by the theme of recent creditrelated yield rises – the increase in yields of onshore Chinese debt securities from government bonds to corporates, and the recent rise in high yield spreads in the US and Eurozone.

As Chinese government bond yields approach 4%, JC Sambor reviews the prospects for Chinese fixed income, given a backdrop of sustained PPI increases, continuing deleveraging, financial market deregulation and higher US rates.

Recent sharp setbacks for high yield indicate resistance to historically low yields. In our second article, Skander Chabbi revisits the case for convertibles against this changing market environment, and the prospects for equity positive tax reform in the US.

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