The objective of this article is to explore the impact of ESG Improvers on the corporate bond market.

We expect a further slowing of growth in Eurozone public debt in 2022, mirroring the 2021 trend vs. 2020 which saw a peak in net issuance, while EU bond supply is likely to remain close to the 2021 level.

Eurozone and US sovereign bond markets have partially reversed the decline recorded over the summer.

Evergrande: not a systemic risk, but a wake-up call in an over-indebted world. Over the past days, financial markets have been shaken by the Evergrande saga – China’s second largest property developer – which is facing difficulties in servicing its huge debt pile.

Persistent supportive funding conditions and the improved macro picture are consistent with a current and expected benign picture for US and European default cycles, which are likely to remain on a downward trend in the coming months.

Bond portfolio optimization is very different from equity portfolio optimization. Indeed, while continuous optimization is efficient when managing a portfolio of stocks, it is not always well-adapted to building a bond portfolio because the transformation of portfolio weights into numbers of shares may lead to significant rounding errors. Indeed, bond investors are often restricted to purchasing bonds in multiples of a minimum transaction unit, which can be expressed as a minimum number of bonds or a minimum amount of dollars.

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The move in rates is just one factor of the macro backdrop that can drive spread trends, but one that worked quite well in past cycles and therefore worth focusing on in the current recovery phase.

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We expect business fundamentals to improve in the coming months, especially for low-rated companies.

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The standard indices available for the bond investment markets, are composed of securities that are weighed by the size of the outstanding debt, and are for that reason weighing heavy on the ones most indebted.

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