Floating rate instruments can make a lot of sense in a rising interest rate environment
Updated from May 19, 2015
In my May 19 blog, I mentioned two strategies that investors could consider in a rising interest rate environment. Given the recent direction of short-term interest rates, I believe the information bears repeating with updated numbers. – Scott Eldridge
Interest rates have been on the march since mid-October, thanks largely to the possibility of a hike in interest rates by the Federal Reserve. In general, bonds are vulnerable to falling market prices as a result of higher rates, but there are income investments that can be used to take advantage of, rather than fall victim to, rising rates. They’re known as floating rate instruments.
What’s happening with interest rates?Read More
Floating rate bank loans offer compelling yield potential for investors wary of rising interest rates
Updated from Mar. 27, 2015
In my March 27 blog, I provided a couple of reasons to consider bank loans in a rising interest rate environment. Given current conditions, I believe this information bears repeating with updated numbers. – Scott Eldridge
The outlook for both interest rates and energy prices is far from certain. For investors who are looking for less exposure to these risks in their fixed income portfolios, bank loans, also known as senior loans, may present an attractive opportunity that’s more defensively positioned (from a rate and energy risk perspective) than the overall high yield market.Read More
Most fixed income asset classes are continuing to advance along the credit cycle. We highlight three markets in transition
As investors anticipate the beginning of a new year, we at Invesco Fixed Income are anticipating a new phase in the credit cycle for several bond asset classes. Below, I will highlight a few areas where we’re seeing substantial changes in asset classes’ fundamentals or operating environment. We believe these areas could influence the broader market in 2016.
What is the credit cycle?Read More
Compelling valuations, increased credit demand and the potential for higher interest rates could bode well for bank stocks
The markets are pricing the Federal Reserve (Fed) to raise interest rates in the wake of October’s employment report, which showed vibrant job creation and accelerating wage growth. As of Nov. 11, Bloomberg’s World Interest Rate Probability function suggested a 68% probability of a rate hike as soon as Dec. 16.1 The high probability of a rate hike is underscored by the recent surge in the two-year Treasury yield, which jumped from a low of 0.55% on Oct. 14 to a recent high of nearly 0.88% on Nov. 11.1
Bank stocks have been among the biggest beneficiaries of interest rate prognosticating. Since Fed Chair Janet Yellen testified in front of Congress in early November and left open the door for a rate hike, bank stocks have generally outperformed. Between Nov. 3 and Nov. 11, the PowerShares KBW Bank Portfolio has outpaced the S&P 500 Index by 4.13%.1
Looking ahead, I believe there are a number of reasons for investors to be optimistic about bank stocks.Read More
Expanding the world’s access to clean water could present investment opportunities
While we in North America tend to take fresh water resources for granted, fresh water is an increasingly scarce commodity in other parts of the world. There is a fixed amount of water available worldwide, with 97.5% of it in the form of salt water unfit for human consumption.1 Of the remaining 2.5%, more than two-thirds of it is frozen in ice caps.1 The world’s population now stands at roughly 7.3 billion, and is expected to grow by a third to 9.7 billion by 2050.2 The United Nations estimates that only 1% of the world’s fresh water supply is accessible enough to meet the needs of a rapidly expanding world population.2Read More
We believe active share more clearly shows how a fund and benchmark differ, a key to delivering alpha.
Active share, a tool for demonstrating how a fund’s portfolio differs from its respective benchmark, has been a common term among active investors over the last few years. Tracking error, which has a much longer history, is often regarded as another tool that does the same job. But the differences between the two measures affect how Invesco’s Global Opportunities investment team views their effectiveness and usefulness for investors.Read More