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"This book provides the world's first comprehensive account of responsible investment for fixed income investors. It enables readers to understand the key characteristics of fixed income investments and the relevance of sustainability-related issues. The expert contributors to this volume explain how sustainability-related issues are and could be taken into account in fixed income research and decision-making, in portfolio construction and in active ownership (engagement). The book presents a series of detailed case studies from different parts of the fixed income market (corporate investment grade and high yield, emerging markets, sovereign and municipal debt), from a range of organisations, with a variety of approaches to responsible investment and to fixed income. It also contains in-depth critical analysis of key issues such as the role of credit rating agencies, the role of green bonds, data and public policy. The book provides investors with practical guidance on how they might improve the financial and sustainability-related performance and the environmental, social and governance (ESG) performance of their investments. It also enables stakeholders such as companies, civil society organisations and governments, to understand the role that fixed income might play in delivering the SDGs, and how they might encourage and enable fixed income investors to pay greater attention to sustainability-related issues in their investment practices and processes"--

Abstract This dissertation presents evidence of five studies showing that sovereign fixed income markets are not always price efficient. The emerging local currency debt market has grown to a large size of more than 1.5 trill ion US Dollars at the end of 2012. The factors that can predict developed market govern ment bond returns can also predict emerging market government bond returns. Changes in an adapted Merton model for government bonds can predict emerging market country credit default swap returns. The euro crisis has highlighted the importance of political risk in government bond markets. Changes in political risk can predict future government bond returns. Market participants should avoid bond markets with higher political risk and rather invest in bond markets with lower political risk. Government bond returns are 3.8 percentage points higher in the second half of the calendar year than in the first half of the calendar year. This seasonal pattern is largely explained by an opposite pattern in not seasonally adjusted U.S. inflation which is 3.0 percentage points lower in the second half of the calendar year. The swaption market has become the largest non-cleared interest rate derivative market with a (notional) size of 30 trillion USD as of April 2014. Although swaption models are different from equity options models, the swaption market contains volatility risk and jump risk premiums consistent with equity options. Combining the two risk premiums in a "riding the swaption curve" strategy provides a strong diversification.

This discussion paper is the third in the Financial Markets Department's series on the structure of Canadian financial markets. These papers are called "ecologies" because they study the interactions among market participants, infrastructures, regulations and the terms of the traded contract itself. In this ecology, we discuss the Government of Canada's domestic fixed-income market. We begin with an overview of Government of Canada securities and their characteristics. We then outline common market practices and the typical participants in the market. We provide high-level statistics on activity in the market and describe the market infrastructures that support trading. Finally, we discuss risks in these securities markets.

AbstractAn emerging literature relies on an index of limits of arbitrage in fixed‐income markets. We analyze the benefits of an index that is model‐free, robust, and intuitive. This new index strengthens the evidence that limits of arbitrage proxy for risks priced in the cross‐section of returns. Trading simulations show that the new index improves identification of limits of arbitrage because it bypasses a noisy estimation step. Relative value indices in the United States, United Kingdom, Japan, Germany, Italy, France, Switzerland, and Canada exhibit strong commonality and high correlations with local volatility and funding conditions. The indices are updated regularly and available publicly.