James Faunce

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Mr. Faunce joined The Penn Mutual Life Insurance Company in September 2014 as a Senior Municipal Analyst. Mr. Faunce is responsible for the analysis of municipal and corporate credit securities with a particular focus on the utility sector.

Prior to joining Penn Mutual, Mr. Faunce was a Portfolio Manager, Trader and Credit Analyst for Aberdeen Asset Management from 2000 to 2014. In this capacity Mr. Faunce managed the municipal credit exposures in the Core products as well as the Tax-Free Fund when considering risk profile and guideline constraints. Prior to that Mr. Faunce worked at Harleysville Asset Management and Miller Anderson & Sherrerd, LLP.

Mr. Faunce graduated in 1989 from Ursinus College with a Bachelor of Science degree in Business Administration.

James has been a Chartered Financial Analyst (CFA) Charterholder since 1998.

Stories by James Faunce

What is the State of Corporate Bond Liquidity?

By James Faunce | September 21, 2017

Since the financial crisis, investment grade corporate bond trading volumes have almost doubled. 2017 volumes are projected to total $4.1 trillion, compared to $2.1 trillion in 2007. However this doesn’t tell the whole story – the size of the overall market has tripled over this time period. As a result, liquidity, measured as volumes relative to the overall market, is down quite meaningfully. Today’s chart shows that volumes currently represent 86% of the market while in 2007 they came in at over 120%. This steady decline is due to numerous factors, but a large contributor is the increased regulatory oversight, most notably the Volcker rule which has limited bank investment capabilities.

U.S. Corporate Bonds Are Losing Their Appeal to Overseas Investors

By James Faunce | July 27, 2017

For the last several years, we have noted the extremely strong technical backdrop supporting investment grade (IG) corporate credit spreads. With the global rate environment extraordinarily depressed from prolonged accommodative central bank policies around the world, investors have diligently been seeking yield. In fact, with the 2016 launch of the European Central Bank’s (ECB) Corporate Sector Purchase Program (CSPP) for eligible euro-denominated corporate debt, the universe of corporate credit opportunities has become even smaller, keeping spreads very firm globally.

Toll Roads Are Not the Road Less Traveled

By James Faunce | June 1, 2017

Many of us traveled this past Memorial Day Weekend to spend time with family and friends, and more importantly, honor all of those who have served our country so bravely. I imagine that more than a few of us utilized one of the many toll roads across the U.S. in our travels. While you may have had to skillfully maneuver around potholes in the roadway, you can take comfort in the fact the financial health of our toll roads is riding high.

Gross Leverage Shifts into High Gear

By James Faunce | April 6, 2017

Over the last several years, there has been a rather large shift in the amount of gross leverage corporate credits have been willing to endure. Today’s chart shows over 50% of investment-grade corporate debt in the JPMorgan non-financial universe had gross leverage under two times EBITDA* at the end of 2012. By the end of 2016, this fell substantially to 20% of the universe. At the other end of the spectrum, this period saw debt levered over four times EBITDA go from 11% to 25%.

Yield-Hungry Investors Facing a Conundrum

By James Faunce | February 2, 2017

Institutional yield buyers in the fixed income credit markets have been waiting a long time for Treasury rates and absolute yields to increase. Since rates hit lows last summer, it appeared that the move higher in yields was finally going to materialize, particularly following the election results in which 10- and 30-year Treasury rates rose almost 80 basis points (bps). However, the very strong tightening in credit spreads has flattened the industrial credit curve quite substantially. As a result, despite the back-up in long Treasury rates, the all-in yield for long industrial credit has been largely offset.

Tax Exempt Municipals: Buckle Up for Volatility in 2017

By James Faunce | January 12, 2017

The tax exempt municipal market is poised to confront many challenges in 2017. The market will need to adjust to a new environment in terms of policy, governance, rates and volatility. The November 2016 election results have highlighted the real possibility of change and the tax exempt municipal market reacted with heightened volatility in the weeks following the election.

Tax Receipts Slow, but the Bid Remains Strong

By James Faunce | September 29, 2016

State and local tax receipts have continued a slowdown that began in the middle of 2015 and has extended into the second quarter of 2016. In spite of this, municipal issuance has continued at a record pace.

The Challenges Facing Public Pensions

By James Faunce | July 28, 2016

U.S. public pensions continue to experience subdued growth as demonstrated in this week’s chart. The U.S. Census Bureau’s recent release for the 100 largest-public employee pension systems shows the market value essentially flat.

Are Mergers and Acquisitions Driving Corporate Issuance?

By James Faunce | April 28, 2016

Corporate mergers and acquisitions (M&A) continue to be a significant driver of the investment grade corporate bond market new issue calendar. As shown in today’s chart, M&A activity made up almost 35% of non-financial issuance in 2015, making it an all-time record total supply year. 2016 is on a similar pace.

Are Taxable Munis a Safe Haven?

By James Faunce | February 25, 2016

Other than U.S. Treasuries, the most stable credit market has been the less-followed taxable municipal bond market, a trend I expect to continue despite what appear to be full valuations.