Yields on high-grade bonds
have risen half a percentage point since the start of 2018, pushing up the cost of debt financing and lowering issuance overall.
While Kazakhstan is unlikely to find itself in urgent need of the frozen money soon, the freeze may limit its ability to manage a large part of the fund's portfolio, which is mostly invested in high-grade bonds
New issuance of US high-grade bonds
could decline 17 per cent, while net supply drops 34 per cent.
"Our new product was designed to meet demand from financial institutions looking for high-grade fixed-income exposure [weighted average portfolio rating of 'A-' and above], with a higher yield than those offered by high-grade bonds
. The breadth and depth of the regional bond market has improved significantly over the past two years, thanks to a wider choice of regional sovereign investment-grade bonds, and investors are looking for more ways to access the market," said Al Hashemi.
Because interest rates on high-grade bonds
have been so low for so long, insurers have less investment income they can use to hold down premium costs.
An insurer would report on the amount of market risk benefits it has promised, calculate how changes in yields on high-grade bonds
have affected the value of the market risk benefits, and include changes in the value in a figure called "other comprehensive income."
AA rating is the third highest possible rating that can be offered to any country or institution; it means that the country in question have high-grade bonds
that have little risk of default.
Taylor said his bill would allow the comptroller to invest some of the fund's balance in "high-grade bonds
" and other investments over a "several-year time horizon." The wording in his bill would mandate presently keeping about $4 billion of the fund liquid, and a larger amount liquid in the future as the budget grows, he said.
Syage said they have a low correlation to Treasurys, and if interest rates rise, they would likely hold their value much better than Treasurys and high-grade bonds
. "And the fundamentals are still strong in that refinancing risk is down, defaults are low and liquidity is high" he said.
However, the industry typically invests in high-grade bonds
and is usually well diversified in geography and bond type.
Dubai credits have outperformed many high-grade bonds
in the United Arab Emirates as the year draws to a close.
BBVA US Senior SA Unipersonal, a unit of Banco Bilbao Vizcaya Argentaria SA (BBVA) (NYSE: BBV) (BBVA.MC), has sold a three-year benchmark of at least USD500m in high-grade bonds
on Wednesday, Dow Jones has reported, citing a person familiar with the transaction.