This is a snapshot of the important factors for various fixed income asset classes. At a glance, we can see and compare their returns, the yield to maturity, their duration or sensitivity to interest rate movements, as well as their correlation with global equities and benchmark U.S. Treasuries.
This page breaks down the source of bond returns for various fixed income indices.
This page compares the spread of various fixed income instruments against treasuries with their long-term averages and historical ranges for a valuation comparison. Wide spreads indicate that the fixed income instrument is cheap, perhaps reflecting market concerns over credit risks. Narrow spreads shows the instrument is expensive, as investors expect lower risks of default.
This slide provides an overview of the global bond market, including the historical 10-year government bond yields of Germany, Japan and the U.S. It also shows the inflation swap rates, which are a measure of inflation expectations.
This page illustrates the developments in the fixed income market with the size of the global bond market and the rise in negative yielding debt.
This slide shows the risk-reward for different fixed income sectors. Risk is measured by the various sectors' correlation with the MSCI AC World index. Moving towards the top right of the chart, one will find increasingly higher yielding fixed income instruments that are characterized by higher correlations with equity markets (hence, higher risk).
This page looks at the sensitivity of the price (the value of the principal) return and total return (principal plus coupon) of a fixed income investment to interest rate changes. An illustration of 1% fall in interest rates is used to analyze the impact across major fixed income assets including U.S. treasuries, corporate credit and various Asian and emerging market credit assets. Falling interest rates mean rising bond prices, while rising interest rates mean falling bond prices.
This page illustrates the level of the 2- and 10-year U.S. Treasury real yields. As real yields matter more to the real economy, investors watch these bonds closely for a signal of oncoming recession. The current recession is exceptional given it was triggered by a pandemic, rather than an economic or financial market event. Nonetheless, this illustrates that interest rates are very low and could provide some support to future economic recovery.
This page illustrates a broad overview of the U.S. investment grade bond market. The left shows the spread over similar duration government bonds - a measure of how much investors get paid to take on the additional risk of investing in investment grade debt. The right shows the number of upgrades from high-yield to investment-grade (rising stars) and downgrades from investment-grade to high yield (fallen angels).
This page is an overview of U.S. securitized assets. On the top-left, we see a breakdown of U.S. securitized assets outstanding. The bottom-left shows the spreads for commercial mortgage-backed securities (CMBS), asset-backed securities (ABS) and mortgage-backed securities (MBS). We also look at some of the fundamentals of the underlying assets, such as delinquency levels in the consumer sector. These should give us an idea of how risky some of these securities are.
This is an overview of the U.S. high yield corporate bond market, in which we compare the spread and default rate levels since 1990. We also look at the default rates of industries within the high yield market to see where the issues are.
This page examines performance metrics on emerging market (EM) debt. The chart on the left highlights the spreads between different EM government local rates and U.S. treasuries, as well as the country's local currency long-term debt credit ratings. A lower credit rating implies a higher risk of default, hence requiring higher yields to compensate for the risk. The right chart plots spread between EM sovereign bonds against subsequent 12-month performance. As shown, wider spreads suggest higher potential returns.
This page looks at the Chinese bond market. We look at the yields offered from various representative Chinese bond indices, a breakdown of the bond market by amounts outstanding and those that are eligible for benchmark inclusion. On the right, we see the risk-adjusted returns and also the correlation between a number of bond benchmarks and Global Aggregate bonds. This shows Chinese bonds have lower correlation and hence provide additional diversification benefits.