The future of fixed income is anything but fixed
From recession to recovery, and whether you’re investing for income or growth, fixed income is a vital part of a diversified portfolio. But today’s unprecedented investment landscape reminds us that the future of fixed income is anything but fixed.
Fixed income fundamentals remain healthy, supported by strong economic data, central bank policies and evidence that vaccines may allow economies to avoid fresh lockdowns. The recent rally in rates may have created opportunities in high yield.
Against the consensus view, US yields have taken a leg lower, largely due to positioning and technical factors. We outline the reasons why we believe yields will move back on their upward track.
China’s reserve requirement ratio cut was larger and sooner than markets expected, but it should be viewed as a targeted boost to economic activity, not the beginning of an easing cycle. China’s economy looks just fine.
With the US 10-Year Treasury yield breaking lower over the past week, we examine the drivers of this move and our outlook for rates.
With the Covid-19 Delta variant now global, we compare the tail risks associated between countries focusing on containment versus vaccine distribution.
With the Federal Reserve signalling that rate hikes could lie ahead, we look at the prospects for global bond yields.
We explore why high yield is one of our best ideas following our Global Fixed Income, Currency & Commodities (GFICC) Investment Quarterly meeting last week.
With investment grade credit spreads near all-time lows, we explore why demand for the sector remains strong.
We compare and contrast the monetary policy stances of the European Central Bank (ECB) and the Federal Reserve (Fed), in light of recent economic data prints across Europe and the US.
Our quarterly EMD strategy report assesses the latest economic developments in emerging markets and sets out our base case scenario for the asset class
Unprecedented stimulus was effective yet challenges remain. Above Trend Growth is still our base case; our preferences include certain U.S. corporates, munis.
Above Trend Growth is our base case (90%) given stimulus, accelerating vaccinations and likely strong growth. Our top picks: high yield bonds and leveraged loans for returns; European bank capital notes, securitized credit and emerging sovereign debt.
After unprecedented global stimulus stabilized economies, what’s next? Many challenges. Still, Above Trend Growth remains our base case at a reduced 60% probability. Our preferences: higher beta U.S. corporates and munis; some local emerging market debt.
In our view, emerging market growth, led by China, could reach 6.7% in 2021. A backdrop of easy global monetary policy further supports the case for emerging market assets broadly, with risks to the upside.
After unprecedented global stimulus stabilized economies, what’s next? Many challenges. Still, Above Trend Growth remains our base case at a reduced 60% probability. Our preferences: higher beta U.S. corporates and munis; some local emerging market debt.
Our updated base case view, to which we assign a 60% probability, looks for global growth to bottom out and gradually transition to a shallow recovery. We see only a moderate risk of inflation, as activity and commodity prices remain low. In this core scenario, we expect central banks to remain accommodative, which we think will support emerging market assets.
Our base case scenario remains a “gradual normalisation,” where the global economy slowly exits recession into 2021. China, which is ahead of the rest of the world in this cycle, continues to lead the recovery.
Whether you’re investing for income or seeking diversification and volatility management in a growth portfolio, we have fixed income solutions to help you achieve your goals.
The value of investments may go down as well as up and investors may not get back the full amount invested.
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