Lending, borrowing and investing in a negative rate world
This paper examines the U.S. commercial mortgage loan (CML) market and U.S. insurers’ investments in CMLs.
Since the financial crisis, for a relatively liquid investment CLOs consistently have had the highest spreads net of capital costs for US life insurers.
A preliminary analysis
Markets, economy, stocks, growth, global, fixed income, international, asset classes
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.
Investors are concerned about the deterioration of corporate debt quality, marked by lower credit ratings and a large share of covenant-lite issuance in the loan market.
In this article, we (1) discuss the key considerations for insurers when allocating to alternatives and (2) make the case for core alternatives strategies, which can provide stable income and low total return volatility.
The 60/40 Asset Allocation Has Two Problems – The “60” and the “40”
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.