Paul McCulley: “We always refer to Treasuries as the world’s safest asset. That’s from the standpoint of credit quality. That’s not from the standpoint of asset price stability. There’s a huge difference.” Treasuries posted their worst losses since at least the early 1970s. Another issue is liquidity. In the past month, it has been “significantly compromised.”

Countries like France and Poland support nuclear, while Germany and Austria oppose it. Ursula von der Leyen said that only “cutting edge” nuclear technology such as small modular reactors might get access to simplified rules and incentives in the EU’s net zero Industry Act and that it would not be eligible for all the benefits of the legislation.

The Financial Conduct Authority said on Monday that the overall quality of ESG-related disclosures made by index providers was “poor” and repeated its determination to ensure that ESG ratings providers should be formally regulated. In a strongly worded letter to chief executives of index providers, FCA warned that they are fuelling greenwashing.

Sweden’s largest pension fund, Alecta that manages pensions for 2.6 million Swedes, is facing losses of almost $2 billion. Alecta was the 4th largest shareholder of Silicon Valley Bank, the 6th largest of Signature Bank, and the 5th largest of First Republic Bank. Though, Alecta’s investments in the three banks amount to just 1% of the fund's total assets.

Silicon Valley Bank had $209 bln in assets. Its tech-focused clients were hit by a cash squeeze and pulled money from their accounts. To cover the withdrawals, SVB sold bonds in its portfolio at a $1.8 bln loss, caused by the rising interest rates. That worried clients, so they pulled even more money, until the regulator announced it was closing down SVB.

This month the ECB started to reduce its bond holdings as eurozone governments issued about €100bn of extra debt. ECB purchased €5 tln of assets during quantitative easing and €1.7 tln during the pandemic. Not replacing all maturing bonds would reduce its holdings by €25 bln per month, increasing the net bond supply to €700bn, from €150bn last year.

Investments in renewables fall due to rising interest rates and higher materials costs to less than half of the planned $1 trillion a year. Unlike power stations that require fuel, the majority of the cost for renewables comes upfront. This makes the sector sensitive to changes in financing. Higher interest rates affest winds, solar, as well as energy storage.

Junior debt issued by banks is risky. It only gets paid back after other bonds. But due to short duration, the losses are modest, when the interest rates rise, and they offer higher return. European banks’ junior debt, known as contingent convertibles, is up 2.8% this year, as analysts for now don't see major risks in the European banking sector.

The trend this year is towards longer-dated new European corporate bond deals, where yields are lower than on shorter-dated debt, but issuers need to offer yield premium over their existing debt, 30 basis points or more. Euro investment-grade corporate issuance in the first two months of this year was €68 billion, with the average maturity of 9 years.

This is the verdict of the MLIV Pulse survey. The reasons are continued rate hikes and fear of a potential bear market. Short-term Treasury bills beat the classic 60/40 portfolio and even high-yield savings accounts pay savers close to 4%. Most investors also believe that passive funds tracking the S&P 500 will beat active equity funds, after fees, in 2023.

Companies issue bonds with the option to buy them back after one year, if interest rates drop, and they enter into an interest-rate swap with a bank, which the bank can cancel after one year. Both are interest-rate options, but that option is more expensive in the derivatives market than in the bond market. The benefit are lower coupons of such bonds.

New rules could sharply reduce the volume of bonds that qualify for a green label. So far, dirty industries could raise cash to fund a small part of their activities. To be labelled “green” under the new rules, 85% of the funds raised by the issuance must be allocated to activities that align with the EU’s taxonomy, which defines sustainable investments.