In this paper, we assess the potential risks associated with such a strategy by stressing capital requirements using spread-implied ratings.
We cut the chances of recession to 25% after a thaw in the trade war and a year of rate cuts; our forecast is for sub trend growth. Favored sectors include emerging market local currency debt and higher rated short-duration securitized credit.
Reaching for yield, which we define as buying bonds with wider spreads after controlling for sector and rating impacts, is a topic that frequently arises in the life insurance industry.
Implications for insurance capital requirements
Themes and implications from the most recent Global Fixed Income, Currency & Commodities Investment Quarterly
This paper examines the U.S. commercial mortgage loan (CML) market and U.S. insurers’ investments in CMLs.