scholarly journals Investment outlook and Asset Allocation in US Pension Funds

2020 ◽  
pp. 38-41
Author(s):  
Rutuj Dodal ◽  
Keyword(s):  
Emerging Markets ◽  
Interest Rates ◽  
Asset Allocation ◽  
Corporate Bonds ◽  
Pension Funds ◽  
Government Bonds ◽  
Bond Returns ◽  
Investment Opportunities ◽  
The Future ◽  
Current Scenario

The classic balanced portfolio for more than 7 decades has been the blend of equities and bonds in the ratio of 60% to 40% respectively. But declining interest rates have forced investors to divert from this investing strategy and look over other alternatives. This has affected bond returns. And once again due to pandemic interest rates were cut down to near zero resulting in very little returns in bonds. To overcome this, alternative investment opportunities should be looked for and several factors which are important in deciding the future investments are to be considered. Some of them are interest rates, valuations, volatility, etc. Based upon the factors and other parameters, the best alternatives will be Equities (cyclical industry, stocks providing dividends, etc), Corporate bonds (with higher investment grades), and government bonds of emerging markets (like China and Peru). These alternatives will act as better investment alternatives to traditional 60/40 asset allocation in the current scenario.

scholarly journals Quantitative Monetary Easing and Risk in Financial Asset Markets

2006 ◽  
Vol 6 (1) ◽  
pp. 1-54 ◽  
Author(s):  
Takeshi Kimura ◽  
David H. Small
Keyword(s):  
Interest Rates ◽  
Large Scale ◽  
Corporate Bonds ◽  
Asset Markets ◽  
Low Grade ◽  
Short Term ◽  
Government Bonds ◽  
Risk Premiums ◽  
Portfolio Rebalancing

In this paper, we empirically examine the portfolio-rebalancing effects stemming from the policy of “quantitative monetary easing” recently undertaken by the Bank of Japan when the nominal short-term interest rate was virtually at zero. Portfolio-rebalancing effects resulting from the open market purchase of long-term government bonds under this policy have been statistically significant. Our results also show that the portfolio-rebalancing effects were beneficial in that they reduced risk premiums on assets with counter-cyclical returns, such as government and high-grade corporate bonds. But, they may have generated the adverse effects of increasing risk premiums on assets with pro-cyclical returns, such as equities and low-grade corporate bonds. These results are consistent with a CAPM framework in which business-cycle risk importantly affects risk premiums. Our estimates capture only some of the effects of quantitative easing and thus do not imply that the complete set of effects were adverse on net for Japan’s economy. However, our analysis counsels caution in accepting the view that, ceteris paribus, a massive large-scale purchase of long-term government bonds by a central bank provides unambiguously positive net benefits to financial markets at zero short-term interest rates.

Market dip highlights US equities as a key risk

2018 ◽  
Keyword(s):  
Emerging Markets ◽  
Corporate Bonds ◽  
Global Markets ◽  
Fixed Income ◽  
Government Bonds ◽  
Content Type ◽  
Bear Market ◽  
Asset Class ◽  
Negative Factors

Significance Global markets are being unsettled by a confluence of negative factors, especially a sell-off in government bonds that has raised the yield on 10-year US Treasuries by 10 basis points to 3.16%, 35 basis points higher than in August. The fierce moves in fixed income are reviving fears about a full-blown bear market in bonds. Impacts Widening policy divergence will boost the dollar; 10-year US Treasury yields are rising faster than their German and Japanese equivalents. Pressure will persist on fragile emerging markets (EMs) and the entire asset class; investors have sold EM equity and bonds in October. Spreads on dollar-denominated EM corporate bonds fell this month, defying worries about high EM corporate debts, but fears will persist.

Default Risk and the Effects of Fiscal Policy on Interest Rates: 1929–1945

1988 ◽  
Vol 16 (3) ◽  
pp. 357-373
Author(s):  
David Bowles ◽  
Holley Ulbrich ◽  
Myles Wallace
Keyword(s):  
Fiscal Policy ◽  
Interest Rates ◽  
Empirical Evidence ◽  
Risk Premium ◽  
Default Risk ◽  
Corporate Bonds ◽  
Private Investment ◽  
Crowding Out ◽  
Government Bonds ◽  
Macroeconomic Models

Conventional macroeconomic models suggest that expansionary fiscal policy causes higher interest rates, resulting in crowding out of private investment. In this article, we argue that such models ignore the default risk differential between the interest rates on government bonds and corporate bonds. If expansionary fiscal policy causes an expansion in real GNP, default risk falls on corporate bonds. Our model suggests that if the default risk premium falls, (1) corporate interest rates may fall relative to rates on government bonds and (2) private investment is crowded in. We find some supporting empirical evidence of this effect for the period 1929–1945.

More nations will issue ultra-long sovereign bonds

2019 ◽  
Keyword(s):  
Emerging Markets ◽  
Interest Rates ◽  
Bond Market ◽  
Government Bond ◽  
Market Conditions ◽  
Yield Curves ◽  
Government Bonds ◽  
Content Type ◽  
Sovereign Bonds

Subject Ultra-long government bonds. Significance Interest rates are low while yield curves have flattened as longer-term bonds have appreciated more in capital terms than shorter-term instruments. In this environment, issuing sovereign bonds that will mature in 50 or 100 years is becoming increasingly popular with governments. Impacts Further government bond issuance will add to the already high global debt mountain. The combination of investors searching relentlessly for high yielding assets and populations ageing could push interest rates even lower. Many emerging markets are cutting interest rates, making ultra-long bonds more attractive; more governments will issue such bonds. Rising inflation and interest rates would reverse currently supportive bond market conditions and decimate demand for ultra-long bonds.

scholarly journals ANALYSIS OF IMPACT OF YIELD, INTEREST RATES, U.S FED RATES, AND INFLATION ON PRICE OF GOVERNMENT BONDS IN INDONESIA

2020 ◽  
Vol 6 (2) ◽  
pp. 59-74
Author(s):  
Antonius Siahaan ◽  
Julius Peter Panahatan
Keyword(s):  
Emerging Markets ◽  
Interest Rates ◽  
Federal Reserve ◽  
Emerging Market ◽  
Bond Prices ◽  
Government Bonds ◽  
Federal Reserve Bank ◽  
Reserve Bank ◽  
Critical Issues ◽  
Negative Effect

Global factors are increasingly important as a cause of international capital flows. It is almost impossible for emerging markets to protect themselves from external influences on their financial markets. Indonesia as emerging market is influenced by some monetary policies adopted by the U.S Federal Reserve Bank. The plan of tapering and Fed rate increase adopted by the Federal Reserve Bank in the last three years made local currencies turned into the depreciation stage, increasing capital outflow from emerging markets. It created huge impact on government bond prices in Indonesia and can be seen through the relationship of some factors with bond prices. This research analyzes the impacts of BI rates, Fed rates, and inflation rates on six government bonds classified into three periods during November 2013 to October 2016 when tapering and Fed rates became critical issues. It finds that in all periods bond prices are significantly influenced by only BI rates, but BI rates, Fed rates and inflation rate have negative effect on bond prices during the observation period.

Luxury in Emerging Markets: Towards Understanding New Prestige Brands in India

2020 ◽  
Author(s):  
Glyn Atwal ◽  
Douglas Bryson ◽  
J. P. Kuehlwein
Keyword(s):  
Emerging Markets ◽  
Consumer Behaviour ◽  
Luxury Brand ◽  
Brand Building ◽  
The Future ◽  
Sustainable Advantage ◽  
Brand Strategies ◽  
Luxury Market

The complexity of luxury- and prestige-brand consumer behaviour combined with the relevance of “new prestige” has created a novel paradigm for luxury-brand strategies in emerging markets. As the luxury market in many emerging markets continues to grow, and in some cases approaches maturity, executives will need to consider appropriate tactics in order to achieve a sustainable advantage with luxury and prestige brands. With a focus on India, this chapter consequently applies the following principles of prestige brand building: (1) mission incomparable, (2) longing versus belonging, (3) from myth to meaning, (4) the product as manifestation, (5) living the dream, (6) unselling, and (7) never-ending growth. Examples include local and international brands with varying degrees of “luxuriousness”. Insights will provide luxury executives the option of using the principles of modern prestige branding to build the future of their brand on a robust foundation.

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