The interest rates, or coupons, that bonds pay differ due to a variety of parameters. If bond A pays a higher interest rate than bond B, this premium is referred to as spread.
The rate of inflation has been quite substantial most recently, in comparison with the recent past and surprisingly so for many market participants. The harmonised consumer price index for the Eurozone was 2% higher on a year-on-year basis in February, which was also the highest value since 2013.
Three and a half years after introduction, the Czech National Bank decided today to remove its 27 CZK/EUR currency floor. Many investors were expecting this decision. Indeed, this trade is currently one of the most popular ones among investors. As expected, the Czech koruna appreciated slightly against the Euro. In the short term the currency will remain volatile, as a lot of speculative money is involved. In the long run I expect that the Czech koruna will continue to appreciate given the strong fundamentals of the Czech economy.
We have seen a number of trend reversals this year, one of them being the end of the negative growth surprises. The forecast of economic growth and inflation are currently not subject to downwards revisions any longer. Read more
Stephanie Clam Martinic (Senior Fund Manager Multi Asset Management) and Gabriela Tinti (Senior Fund Manager Equities Emerging Markets)
In spite of the increase in prices, the interest in real estate is unwaning
In view of the current level of real estate prices, direct real estate investments are hardly affordable anymore for private investors. The purchase of real estate requires substantial equity at the outset, which for the investors is associated with high risk. In addition, incidentals and administrative costs for the construction and maintenance of the construction project are a burden. Whoever wants to buy real estate, should also have the necessary know-how in the field, because any two properties are never the same. An alternative solution to participate in the rising value of real estate is to invest in real estate funds.Read more
Economic growth in the emerging markets has picked up substantially, while that in the industrialised economies has been rather stable. This has led to an increase in the growth differential in the emerging markets’ favour. Investor demand for emerging markets bonds has been on the rise in search of higher yields and interest rates.
ESPA RESERVE CORPORATE: 3 questions for Bernd Stampfl, fund manager.
Author: Felix Dornaus, Senior Fund Manager Emerging Markets Bonds
Brazil tactically overweighted at the moment
Most of the fundamental economic data are currently not good. In 2016, the country is in recession; for 2017, a minor growth rate of +0.7% is expected. The nominal budget deficit of 2016 is about -10%, with a primary deficit of -2.7%. This comes as a surprise, given that investors had been used to primary surpluses from Brazil. The current account is also slightly in deficit. The only silver lining is the low foreign government debt of less than 20% of GDP, accompanied by high foreign exchange reserves. We therefore do not expect any issues for bondholders with regard to the payments they are due.
Interview with Christian Gaier, Senior Fund Manager for emerging markets government bonds
Emerging equity and bond funds have borne the brunt of the consequences of the global uncertainties in the past years. Wars and conflicts in the region, slumping commodity prices (especially oil), and fears of an interest rate reversal in the USA have caused many investors to withdraw their capital and “park” it in safe havens. Now signs are indicating that investors have been staging a comeback.