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Capital Markets

Debt: Market round-up

Negative returns

Baring Asset Management has warned that many global bond investors face negative total returns this year. Low yields on long-term bonds, momentum trading, over-estimating future supply, and buying that is not sensitive to price, are making investors nervous. This is especially true in continental Europe, and many investors are overweight European bonds.

Going short on bonds could help overcome the problem. "Conventional bond funds are facing increased volatility," said Colin Harte, manager of Baring's directional global bond trust. "But European fixed income investors can take advantage of this volatility through directional strategies."

The Baring Directional Bond Fund's strategy is to short Japan and Europe, where yields are low and inflation could re-emerge. 

First Islamic ship bond

ABC International Bank (ABCIB) Islamic Asset Management has arranged the first ship finance deal that uses an Islamic bond issue. Abu Dhabi Commercial Bank and Arab Banking Corporation joined ABCIB as joint underwriters and placement agents for a $26 million corporate sukuk.

The unquoted private issue is backed by the lease financing of the Venus Glory, a very large crude carrier. The structure keeps the existing lease chain in place and lets the ship's owner, Pacstar Group, continue to use conventional finance.

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