This paper examines the U.S. commercial mortgage loan (CML) market and U.S. insurers’ investments in CMLs.
Markets, economy, stocks, growth, global, fixed income, international, asset classes
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.
At its July meeting, the U.S Federal Reserve (the Fed) cut rates for the first time since December 2008.
Since the financial crisis, for a relatively liquid investment CLOs consistently have had the highest spreads net of capital costs for US life insurers.
Our view over the past few quarters has been that EURUSD should be rangebound, as the cyclical outperformance of the US economy is offset by the eurozone’s relatively better balance of payments position.
Implications for passive bond allocations
The arrival of the bond bear market, continued normalizing of monetary policy and need to finance expanding U.S. budget deficits, long-term rates are set to rise.