Category: High Yield Bonds

Mar 15

Do high yield bonds outperform other asset classes? The race begins….

Over the course of the current (2015/16) financial year, I have built up a portfolio of 12 of the highest yielding Sterling fixed-income securities generally available to a retail investor. These securities are held in an individual savings account (Isa). This is important, as it means that all interest accrues free of tax. As at …

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Feb 16

Who’s afraid of the big bad bear?

An air of despondency hangs over the City of London, with security markets in steady decline, dragged down by the collapse in international commodity prices. In Aberdeen, Britain’s oil capital, the atmosphere is closer to panic. Property prices are tumbling, and many who want to sell are finding no buyers at all. In late January, …

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Jan 12

The Kondratieff Wave and the Bond Market

Following commentary over the past three months on the Kondratieff cycle, the question has been raised as to how an investor can tell whether financial markets are in the upswing or downswing phase of a long wave. During the upswing, private sector investment is strong and rising; share prices increase over time in real terms; …

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Oct 13

Palmerston, Kondratieff and Me. Long waves in British financial markets.

The Victorian statesman Lord Palmerston once observed of the Schleswig-Holstein question that it was so complex that only three men had ever fully understood it. One of them had gone mad, the second had since sadly died, and the third was himself – but it was so long ago that he had completely forgotten the …

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Jun 09

Eros International – the paradox of a low risk, high yield bond

It is a sign of the times, and the remarkably benign conditions prevailing in the London securities market, that no less than 103 of the 106 corporate bonds quoted on the LSE’s Order Book for Retail Bonds (ORB) are trading above their par value. This isn’t entirely good news for a bond investor. First and …

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May 12

High Yield Bonds and the Efficient Market Hypothesis

The proposition that investments in high yield bonds will generate returns that are greater than could be secured from other investments is contrary to the Efficient Market Hypothesis (EMH). If the EMH is correct, then it should be impossible for an investor in high yield bonds to generate excess returns. So the performance of the …

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Apr 09

Rating Agencies and Bond Mispricing

As reported in March, over the coming months this site will report results of a real-time experiment in high yield bonds. Casting an eye over potential candidates for the High Yield Portfolio, my attention was caught by two rather curious features of the Co-operative Bank’s 11% Subordinated Loan Notes. These notes were issued in December …

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Mar 16

A Real Time Financial Experiment in High Yield Bonds

Over the coming months, I am conducting a real-time financial experiment designed to test the validity of the hypothesis that investments in high yield bonds (so-called “junk bonds”) systematically outperform investments in apparently safer options such as gilt-edged securities or investment grade corporate bonds. The High Yield Hypothesis emerged from research undertaken by W Braddock …

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