Inflation-linked swaps with regulated UK utility companies and PFI projects

“When the seller is ready, a buyer will appear.” Even in today’s negative real yield environment, demand from pension schemes for inflation-linked assets remains strong. ┬áBecause they offer liability matching characteristics, pension schemes, for risk management purposes, have continued to pay, what they and their historical models, would consider to be expensive prices for inflation-linked … More Inflation-linked swaps with regulated UK utility companies and PFI projects

Carry and rolldown: the hidden cost of waiting to hedge

It may seem counterintuitive, but it is possible to invest in low yielding assets and generate attractive excess returns. Consider, for example, Japanese Government Bonds (JGBs). Since 2002, 10 year JGBs have yielded a measly 1.22% p.a., but their total returns exceeded yields by almost 1.00% p.a. with a volatility of just 3.88%. This equated … More Carry and rolldown: the hidden cost of waiting to hedge