Jonathan Rochford

Narrow Road Capital is a credit manager with a track record of higher returns and lowers fees on Australian credit investments. Clients include institutions, not for profits and family offices.

Expertise

The downturn in high yield will be big, long and ugly

Jonathan Rochford

The US high yield market has grown larger and riskier since the financial crisis. Issuers of debt have the whip hand as buyers compete to gain an allocation in the face of surging demand from CLOs and retail funds. Companies are emboldened to seek ever weaker covenants and are taking... Show More

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Media Worth Consuming – May 2018

Jonathan Rochford

Italian bonds gapped lower as bond dealers wouldn’t bid on them. Moody’s puts Italy on review for downgrade, it could fall below investment grade. Italian political parties considered asking the ECB for €250 billion of debt forgiveness. The Italian government bond sell-off is spilling over into the country’s financial and... Show More

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Media Worth Consuming – April 2018

Jonathan Rochford

Wells Fargo copped a $1 billion fine for selling dodgy insurance and is keeping bad company in subprime lending. Barclay’s CEO got off with just a fine for trying to unmask a whistleblower. CBA charges fees to customers for over a decade after they died. Deutsche Bank paid $35 billion... Show More

Credit Snapshots – April 2018

Jonathan Rochford

You know it’s late in the credit cycle when credit investors give away their key protections in return for just a little more yield. This acquiesce comes in different forms, including higher levels of leverage, longer dated debt, subordinated debt and weakened or eliminated covenants commonly referred to as “covenant... Show More

credit high yield high yield credit distressed debt

How ASIC Can Become a Feared Regulator

Jonathan Rochford

The revelations last week at the Banking Royal Commission illustrate the economic principle that people respond to incentives. Charlie Munger long ago summed this up with “show me the incentive and I will show you the outcome”. The rewards for ripping off customers are substantial, the probability of being caught... Show More

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The Economics of Population Growth

Jonathan Rochford

The elephant in the room for Australia’s Federal Parliament has finally been called out. Australia’s rapid population growth is arguably as important an issue as balancing the budget and the environment. Yet almost no one has dared to mention it since Kevin Rudd talked of a “big Australia” in 2009.... Show More

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Credit Snapshots from March 2018

Jonathan Rochford

The increasing gap between US dollar Libor and overnight index swaps (OIS) this year is garnering much attention as it was one of the earliest signs of problems in 2007. Libor is a compilation of the interest rates that major global banks charge when lending to their peers. The OIS... Show More

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Media Worth Consuming – March 2018

Jonathan Rochford

Some investors are asking if global growth is too strong yet State Street sees global investor confidence soaring. There are signs of economic stress in the US, as well as global leading indicators pointing to a negative outlook. Show More

economics government finance society

Credit Snapshots from February 2018

Jonathan Rochford

With the increase in the American overnight rate and long term bond yields questions are starting to be asked about whether the federal government debt load is sustainable. As interest rates increase, so does the interest bill. Neither major political party seems to care, they have taken turns at making... Show More

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Media Worth Consuming – February 2018

Jonathan Rochford

Economic data is generally solid, one example being the very robust December and January readings for the Cass freight index. Bottom up earnings per share for the S&P 500 is forecast at $157.57 for 2018 with a record level of upward revisions in first month and half of 2018. If... Show More

#media #economics #finance #politics #china

Short Volatility is a Legitimate Investment Strategy

Jonathan Rochford

In the wake of the VIX spike and bust up of roughly a dozen inverse volatility products this month, there’s been plenty of people criticising short volatility strategies. Harvard has been singled out as it was one of the largest holders of XIV, an exchange traded note that has been... Show More

Media Worth Consuming - January 2018

Jonathan Rochford

Goldman Sachs sees investor risk appetite at the highest level since the series began in 1991, whilst Bank of America and TD Ameritrade see investor cash levels at record low levels. Investors struggle to imagine a decline occurring as calls are expensive and puts are cheap. The long arguments for... Show More

#equities #credit #markets #economics #finance

IMF on China: A Downturn is Inevitable

Jonathan Rochford

A recent working paper from the IMF titled “Credit Booms – Is China Different?” provides a good summary of many of the key issues facing China’s economy. Rapid credit growth since the global financial crisis is record setting for both its total expansion and its duration. Credit is being poorly... Show More

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Credit Snapshots - December 2017

Jonathan Rochford

Risk asset returns were generally positive in December across equities, credit and commodities. Equities in Australia (1.6%), the US (1.2%) and China (0.6%) led the way as Japan (0.2%) eked out a gain whilst Europe (-1.9%) fell back. Spreads contracted again on high yield debt as investment grade margins held... Show More

Media Worth Consuming - December 2017

Jonathan Rochford

Private equity owned subprime auto lenders are struggling with high arrears. Millions of Americans are being chased for debts they don’t owe. Calpers is accused of increasing its equity allocation to avoid a lower assumed return and higher contributions. Resets on CLOs help to evergreen deals and reduce ramp-up issues. Show More

#equities #credit #markets #economics #finance

High Returns, Low Volatility – What Could Possibly Go Wrong?

Jonathan Rochford

Economic news was strong in October, led by US Q3 GDP coming at an annualised rate of 3.0%. Quarterly earnings and sales for S&P 500 companies are beating estimates by more than usual. One standout was bellwether stock Caterpillar, which after four years of declining revenue has seen sales up... Show More

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Media Worth Consuming - October 2017

Jonathan Rochford

Here's this month's interesting and informative media on economics, finance, government and society. Show More

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Four Lessons from Toys R Us and Puerto Rico’s Defaults

Jonathan Rochford

The defaults by Toys R Us and Puerto Rico were remarkably similar, even though corporate debt and sovereign debt are quite different. This article highlights three lessons that can be taken from both and one lesson that highlights a key difference between corporate and sovereign debt. Show More

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BIS Nails the State of Global Corporate Debt

Jonathan Rochford

The Bank for International Settlements (BIS) quarterly report is always worth the read. Whilst it is academic in style and length, it consistently raises material that matters. Taken from the September report, the graphic below highlights the big issues for global corporate debt. The rest of this short article explains... Show More

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Media Worth Consuming - September 2017

Jonathan Rochford

How a one-man investigative operation exposes dodgy American companies. A US start-up gives house buyers a down payment in return for 1-3 years of Airbnb bedroom rentals. 15 reasons and 6 benefits from hiding your wealth. If you are starting out or just want a reminder, here’s 36 obvious truths... Show More

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Thanks James. Europe, Asia and Emerging Markets have all seen a decline in lending standards since 2009. Cov lite lending in Europe is not far behind the US. In Asia, many markets remain overbanked and China continues to be on a borrowing and malinvestment binge. Venezuela, Argentina and Turkey are EMs in tricky situations.

On The downturn in high yield will be big, long and ugly -

Thanks Ron, it is late stage for credit globally and a time to be careful with all asset classes. If credit markets do suffer a downturn, highly leveraged equities will follow soon after. Centro, Allco, Babcock and Brown, Rams are some examples from last time.

On The downturn in high yield will be big, long and ugly -

Thank you all for the comments. I share the sentiment that politicians are not acting in the interests of all Australians and are not spending our taxes efficiently.

On The Economics of Population Growth -