Insights

Evergrande Risk Stays Local So Far – Fixed Income Weekly
US data releases point to a peak growth cooling, in line with central bank expectations in the light of the Delta variant; however, not altering the tapering expectations given no meaningful signs on labor conditions

Fixed Income

20 Sep 2021

ECB Struck A Balanced Tone – Fixed Income Weekly
ECB meeting hinted a reduction in PEPP purchase with a balanced tone, Lagarde reinforced that it’s too early to discuss the end of the program; inflation outlook has been lifted

Fixed Income

14 Sep 2021

Better Safe Than Sorry – Fixed Income Monthly
The Fund ended August with a modestly positive return. The general risk appetite was different from the usual summer lull given the highly anticipated Jackson Hole symposium towards the month-end and the regulation tightening in China around mid-August. For the rates market, Govt bond yields have rebounded from the local bottom (UST 10yr: +8bps, Bund 10yr: +8bps in August) as US labor market conditions continue to improve albeit with some uneven slacks in certain sectors. This has put some pressure on benchmarked products due to the unavoidable duration exposure in the index. Given our limited rates exposure by mandate (currently at 1.6 years) and a carry of ~250bps, the Fund has been able to offset some mild credit spread widening during the month.

Fixed Income

9 Sep 2021

Messy Payroll Numbers? – Fixed Income Weekly
Headline payroll disappointed though underlying indicators are less negative, UST curve bear steepened

Fixed Income

6 Sep 2021

Jackson Hole Didn’t Surprise – Fixed Income Weekly
No surprise from the Jackson Hole symposium as Powell showed patience and cautiousness.

Fixed Income

30 Aug 2021

Tough Love – Fixed Income Weekly
Mixed global data and the unsettled Delta variant coupled with expensive markets sets the backdrop of the current “tough love” situation for risky assets.

Fixed Income

23 Aug 2021

Optimizing A Symmetrical Payoff – Fixed Income Monthly
The Fund performed in positive territory amidst a month where credit spreads were dominated by macro news. We see some tweaks to the big picture. The previous heightened rate vol has taken a back seat this month with both 10yr UST and German Bund retreating to the sub 1.25% and -0.45% area by the end of the month. The ECB dovishness on its forward guidance further strengthened the comfort zone for EUR credit. Meanwhile, the overall stretched asset valuation was vulnerable to the periodic volatility in the commodity space and China’s crackdown on certain domestic sectors (tech, tutoring and food delivery). Thanks to the relatively elevated carry (currently at 260bps) and shortened credit duration (currently at 3.7yrs) as well as limited rates exposure (hedged to 1-2 years by mandate), the long book was able to generate positive total returns with limited volatility.

Fixed Income

10 Aug 2021

The problem of negative deposit rates – how can it be resolved?
A quick guide to what investors can do in today’s markets about the challenge of negative deposit rates. We will also uncover the value of the Cape Select Bond Fund as an alternative liquidity solution.
Speaker: Andreas Heeb Lead Portfolio Manager, Cape Select Bond Fund Recorded July 15th, 2021

Fixed Income

19 Jul 2021

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How Did We Do In 1H? – Fixed Income Monthly
In short, the YTD Fund performance didn’t disappoint especially in the context of non-stop headwind coming from rates vol and inflation fear. We finished the first half of the year with a total return of 1.3% in EUR and 1.7% in USD with an average vol below 1% (annualized based on daily return). The curve bear steepening YTD has been more than beneficial to our strategy (given sub 2yr rate exposure) while the opposite is true for more benchmarked strategies, and this trend is likely to persist as long as the rates trajectory remains uncertain.

Fixed Income

12 Jul 2021

Mixed US Job – Fixed Income Weekly
US jobs beat while unemployment rate little changed and far from the Fed’s target, curve moderately flattened.

Fixed Income

5 Jul 2021

A Rather Calm Week – Fixed Income Weekly
Strong European datasets with both German IFO and Euro area PMI reaching record highs.

Fixed Income

28 Jun 2021

What Happened to ‘Curve Steepening’? – Fixed Income Weekly
Fed “talking about talking about tapering” leading to a meaningful curve flattening with the front-end rate rising and the long-end rate falling, same as the medium-and long-term inflation expectation.

Fixed Income

21 Jun 2021

Baby Steps – Fixed Income Weekly
US CPI, another impressive print lifted by used cars and trucks while pressure from permanent factors like shelter has also started to emerge.

Fixed Income

14 Jun 2021

Pack Light – Fixed Income Monthly
We ended the seasonally unfriendly May with a flat monthly performance despite some spread widening in the broader credit universe.

Fixed Income

9 Jun 2021

A Slow Yet Decent Week – Fixed Income Weekly
The FED’s unwind of the corporate credit facility has limited technical impact on the USD bond market due to its negligible size, which is rather a baby step towards tapering.

Fixed Income

7 Jun 2021

Not Much Conviction – Fixed Income Weekly
General macro sentiment improved as the Fed officials emphasized on the temporary nature of the near-term inflation spike; EUR rates vol will likely come back given June ECB meeting, better leading indicator readings and potential fiscal policy unwind.

Fixed Income

31 May 2021

Roaring Inflation ‘Fear’? – Fixed Income Weekly
Inflation fears triggered volatility in rates and equity, modestly impacting credit spreads given the visible rise in asset correlation; EUR rates sold off notably amid vaccination progress and better leading economic indicators.

Fixed Income

17 May 2021

With The Sun Come The Clouds – Fixed Income Monthly – April 2021
April is statistically the most reliable month in terms of positive total returns for fixed income investments, and it did not disappoint albeit euphoria was largely absent.

Fixed Income

11 May 2021

US Jobs disappointed, credit supply resumed – Fixed Income Weekly
Despite primary market supply in the subordinated space temporarily weighing on the secondary curve, spreads on a standalone basis remain attractive for fixed income investors.

Fixed Income

10 May 2021

Rates Vol Déjà Vu, Soft Sentiment in Credit – Fixed Income Weekly
Fed meeting praises the improving growth outlook and reaffirms the patience on the monetary front; rates vol back to the market both in the US and Europe.

Fixed Income

3 May 2021

A Mini Consolidation – Fixed Income Weekly
Mixed macro headlines with the US proposing capital gains tax briefly weighing on sentiment and the ECB reiterating its commitment of accelerating PEPP purchases.

Fixed Income

26 Apr 2021

Seasonality Is Now In The Money – Fixed Income Weekly
Rates rally despite upbeat inflation, job and retail data in the U.S.

Fixed Income

19 Apr 2021

Shifting to diversified carry – Fixed Income Monthly – March 2021
The first leg of rates volatility has now settled. Although global credit total return has been adversely impacted by rates moves, the portfolio ended in positive area for the month of March.

Fixed Income

13 Apr 2021

Smooth Flight Above Cloud – Fixed Income Weekly
All  indicators  point  to  a  smooth  flight  in  April:  falling  rates  vol,  encouraging economic  data  from  the  US  as  well  as  green  shoots  from vaccination  in  the Eurozone

Fixed Income

12 Apr 2021

Reflation Trade Taking a Break – Fixed Income Weekly
Reflation trades took a break as COVID related concerns resurfaced as well as some US-China tension déjà-vu

Fixed Income

29 Mar 2021

Digesting Upward Growth Revision – Fixed Income Weekly
Fed meeting shows economic projection at 6.5% for 2021 and Core PCE reaching 2.2% while dot plot indicates policy rates well anchored through 2023

Fixed Income

22 Mar 2021

Challenges from an Investment Grade perspective
Michael Lienhard, Head Fixed Income Portfolio Management: The challenges of an asset class with a shrinking carry and diminishing diversification benefits in a balanced portfolio context.

Fixed Income

17 Mar 2021

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Managing interest rate and credit risk
Luca Orlando, Fixed Income Portfolio Manager: Managing interest rate risk and credit risk as two separate asset classes – why it matters. (12 min)

Fixed Income

17 Mar 2021

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Finding tools to increase carry
Andreas Heeb, Fixed Income Portfolio Manager: Subordination in a capital structure context as an efficient tool to increase carry without changing the default risk profile. (22 min)

Fixed Income

17 Mar 2021

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ESG in Fixed Income investing
Sarah Zhu, Fixed Income Portfolio Manager: ESG in Fixed Income investing – green bonds, ESG labeling, what’s more? (20 min)

Fixed Income

16 Mar 2021

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Actions Are Louder Than Words – Fixed Income Weekly
ECB will accelerate the PEPP purchases (without specifying how much) as a response to rising government bond yields, boosting sentiment (for now).

Fixed Income

15 Mar 2021

Challenging the Forward Guidance – Fixed Income Monthly – February 2021
February is rather reminiscent to January as the first half provided some more breathing room while the second half was “risk-off” given rising government bond yields and surging rates volatility were the only game in town.

Fixed Income

12 Mar 2021

Fed Didn’t Talk Down Yields – Fixed Income Weekly
Powell mentioned that nominal yields cannot be considered on a standalone basis while the broader financial condition remains accommodative.

Fixed Income

8 Mar 2021

Loud but unclear – Fixed Income Weekly
Rates continue to sell off with the US 10-yr nominal rate shooting above 1.5% and real rate surging by 20bp WoW, fighting against Central Banks’ recent communication.

Fixed Income

1 Mar 2021

Delivering returns in a yield-starved world – UI Cape Credit Fund (video 5 mins)
(Video in German) With nominal rates below rolling inflation, spreads need to be larger than short term rates in order to preserve purchasing power.

Fixed Income

24 Feb 2021

Deutsch

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Fixed Income Event – 11 March
Developed World Fixed Income – fast revival or slow death? Join Cape Capital as we discuss the asset class in a potentially rising rates environment and an increasingly green-aware world.

Fixed Income

22 Feb 2021

Can’t Fight the Rates Gravity – Fixed Income Weekly
Despite general spread tightening, the inherent rates component (US 10yr yield rising 13bps) within cash bonds gave a week of mostly negative total returns for benchmarks.

Fixed Income

22 Feb 2021

A Rather Constructive Week – Fixed Income Weekly
Constructive tone was back in the AT1 segment, and it outperformed all other segments in the IG space. Rising rates hurt Corporate Seniors in both total return and capital flow aspects.

Fixed Income

15 Feb 2021

Consensus – Nonsensus? – Fixed Income Monthly – January 2021
January was a month with two faces. It started friendly with investors rushing into the reflation trade, moving spreads tighter and rates higher. This was reversed in the second half of the month.

Fixed Income

9 Feb 2021

Rising rates – Fixed Income Weekly
Beta compression remains the main contributor behind positive performance. Lower beta senior structures underperformed given the dissipating risk premium and relatively ‘rates sensitive’ characteristics.

Fixed Income

8 Feb 2021

Risk-off sentiment continued – Fixed Income Weekly
Risk-off sentiment continued across the board; weak “technicals” in Corporate Hybrids; the case for the asset class remains strong in the medium term

Fixed Income

1 Feb 2021

US Fiscal Acts Big, Sentiment Suppressed by Virus – Fixed Income Weekly
The inauguration week has brought the new administration to the White House along with the market's biggest bet on the fiscal stimulus...

Fixed Income

25 Jan 2021

Consolidation Week – Fixed Income Weekly
Italian politics triggering some caution in credit spreads. Biden has proposed a 1.9trn fiscal stimulus, pushing up yields and curve steepening. US Banks kick-off Q4 earning season, cutting reserves for loan loss provisions.

Fixed Income

18 Jan 2021

Stay Agile and Flexible – Fixed Income Monthly – December 2020
December was caught in the crossroads of vaccine, virus, Brexit finale and the US fiscal package negotiation.

Fixed Income

12 Jan 2021

Surging Yields, Rising Oil, Tightening Spreads – Fixed Income Weekly
2021 has started in the same mood as the old year ended..

Fixed Income

11 Jan 2021

Mixed Feelings – Fixed Income Weekly
The ECB's December meeting has largely met market expectations by adding an extra EUR 500bn to the existing PEPP program..

Fixed Income

14 Dec 2020

Home Run – Fixed Income Monthly
Last month we discussed reasons to stay well-invested in credit markets. For now it seems that the powerful “technical bid” is too strong for a reversal, even though the gap between valuations and fundamentals is difficult to ignore. In our view, investing is about analysing the degree of “symmetry,” which is an issue that some segments of the fixed income market face more than ever. However, there are still pockets with value and decent upside.

Fixed Income

9 Dec 2020

Surging Treasury Yields – Fixed Income Weekly
The US 10Y jumped 13bps to 95bps with some sharp curve steepening; The US labour market recovery stays robust, suggesting resilient household demand; Spreads keep grinding tighter across the board supported by technicals and risk appetite for a “compression-everything” trade.  

Fixed Income

8 Dec 2020

Still Beta Compression – Fixed Income Weekly
Following Pfizer and Moderna's high efficacy results in stage 3 trials..

Fixed Income

30 Nov 2020

The fixed income dilemma – Video
Is it still possible to have attractive yields on Investment Grade companies despite the current low yield environment?

Fixed Income

25 Nov 2020

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V for Vaccine – Fixed Income Weekly
The vaccine phase has triggered additional support for risky assets in general - and some rotation in particular.

Fixed Income

23 Nov 2020

Trading regime reset – Fixed Income Weekly
Breaking news on the promising efficacy of the Pfizer vaccine stage 3 trial shifted the trading regime aggressively, potentially marking the beginning of the end of the current pandemic paradigm.

Fixed Income

16 Nov 2020

Less known unknows – Fixed Income Weekly
As we are writing this note, the breaking news on the vaccine..

Fixed Income

9 Nov 2020

Dealing with more unknows – Fixed Income Weekly
Realized vol spiked last week driven to a large extent by the convolution..

Fixed Income

2 Nov 2020

Pre-election syndrome – Fixed Income Monthly
October had two faces with an initially strong first half followed by..

Fixed Income

31 Oct 2020

Stay close to home, but stay in – Fixed Income Monthly
September was a wakeup call after a 2-month rally..

Fixed Income

30 Sep 2020

So far so good – Fixed Income Monthly
Credit spreads have tightened relentlessly in July across the board..

Fixed Income

31 Jul 2020

Looking Beyond the Second Wave – Fixed Income Monthly
In June, mark-to-market portfolio spreads have continued to tighten..

Fixed Income

30 Jun 2020

Press Release – Cape Equity Fund 5 Stars
5 years, 5 stars, 5 globes

News from Cape

16 Jun 2020

Marching into Phase 2 – Fixed Income Monthly
The Portfolio currently runs a spread of >300bps above Libor with a credit duration slightly north of 4 years

Fixed Income

29 May 2020

Finding gravity – Fixed Income Monthly
Looking back at where valuations where in March, spreads found more gravity in this month as global markets embraced an exuberance of policy stimulus

Fixed Income

30 Apr 2020

Midway reflection – Fixed Income Monthly
We are still midway through the selloff of the decade triggered by the pandemic

Fixed Income

31 Mar 2020

Jump process in a not-so-random walk – Fixed Income Monthly
COVID-19 hijacked global markets in February, iTraxx Main widened 25bps and Xover by 90bps in the final week

Fixed Income

28 Feb 2020

“Range-bound” through Q1-2020 – Fixed Income Monthly
January ended with rising volatility, triggered by Covid-19, and risk-off sentiment has sent IG cash indices higher

Fixed Income

31 Jan 2020

All’s Well That Ends Well – Fixed Income Monthly
2019 did not change the face in December and ended the year as it started: Just friendly.

Fixed Income

31 Dec 2019

Watch out for “Cliff” – Fixed Income Monthly
November was a reasonably constructive month in terms of credit spreads in aggregate.

Fixed Income

30 Nov 2019

Rates rebounded, credit spreads softened – Weekly update
US data this week confirmed again the relatively solid consumer side and the softening industrial side of the economy.

Fixed Income

15 Nov 2019

Beware of de-tail – Fixed Income Monthly
We observe a strong decompression of IG vs. HY in the light of QE 2.0 and a higher number of “accidents” - but within the IG complex we would expect some spread compression

Fixed Income

1 Nov 2019

New low-duration fund
Cape Capital launches the Cape Select Bond Fund - offering investors a short-term alternative to holding cash in times of negative interest rates

News from Cape

7 Oct 2019

Credit matters – a practical roadmap to tranches
CDS tranches may be used to construct a comfort zone amid a universe of unknowns. Tranches allow investors to slice and dice the risks, to tailor a default risk profile that they find more bearable, while potentially generating an attractive carry

Fixed Income

1 Aug 2019