He suggests either moving into cash and bonds or, for more active traders, tightening stop limits and using put options.
HSBC, the most active underwriter of "dim sum" bonds overall, and Royal Bank of Scotland Group PLC, for instance, have formed teams dedicated to developing their offshore yuan services in London.
The news about the Stockton, California bankruptcy has brought further relevance to a topic I referenced at the end of a recent blog post: the critical importance of active management when it comes to muni bonds.
If credit conditions deteriorated, active investors could move to very high quality bonds, including Treasurys.
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Most bonds are held until maturity, so an active secondary market is typically not available for them.
If interest rates rise, active fixed-income investors could invest in short-term bonds, which tend to remain fairly stable in rising rate environments, or use floating rate funds, which are more insulated from the negative impact of rising rates.
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Its four-and 24-year paper was active with the shorter-dated 2015 issue actually gaining when government bonds were lower.
Wilbur Ross-backed Assured Guaranty is the only active insurer currently in the market, taking 81% share of municipal bonds insured last month.
Investors consider sales of longer-dated bonds a more accurate gauge of investor demand as foreign investors tend to be more active.
Instead, these investments would rely more heavily on active management--things like emerging market equity and debt funds, domestic high-yield bonds, small cap equities, real estate and private equity.
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