Weekly Intelligence Report – Groundhog day, B or BB and liquidity constraints of property ownership

19 Apr 2016

Investors and families share at least one characteristic: the habit of commemorating anniversaries. Whilst family anniversaries are most often associated with fond memories of happy times, investors more often mark dates associated with pain, fear and market dislocation. It is nearly six years since Greece’s emerging debt crisis first erupted into investor consciousness, exposing fault lines and raising existential fears for the European Union’s future. Six years later, we are approaching the first review of the latest Greek programme. In the first of this week’s articles, Richard Barwell explores the prospects for this review, and tentatively points to the presence of significant underpriced risks (both to the upside as well as to the downside) arising from this process.

Olivier Monnoyeur turns the spotlight on the European high yield market next, and examines the impact of the European Central Bank’s imminent corporate bond buying programme. Although high yield issues are not eligible, spillover demand for higher rated high yield bonds is already evident as targeted investment grade non-financial corporate spreads tighten significantly. Demand for safer, higher quality issues remains very strong, distorting the relationship between single B and BB issues, creating attractive terms for less constrained investors to reach down the credit curve.

Safety, and liquidity, is at a premium everywhere. In the last of our pieces this week, Shaun Stevens looks at the impact that the uncertainty raised by the upcoming Brexit vote is having on the UK real estate market, and highlights the very different return experience investors have had this year, comparing listed real estate holdings against direct investments.

Happy reading!

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