Fixed income assumptions
Please note that our 2020 Long-Term Capital Market Assumptions were originally calculated as of September 30, 2019 and published in November 2019, and thus did not reflect recent extreme price moves in many asset markets resulting from the ongoing COVID-19 disruption. Please refer to the Executive Summary page to discover our updated assumptions as of March 31, 2020. Please reach out to firstname.lastname@example.org with any questions.
Lower rates for even longer
- Anticipating continued central bank dovishness, we shift our equilibrium interest rates lower across major G4 markets and extend the time horizon over which we expect rate normalization.
- Cash rates are still far below equilibrium in markets outside the U.S. and are only expected to converge very gradually to equilibrium. This extended normalization creates a significant drag to expected returns in the eurozone and the UK.
- Long core duration assets across all major markets see poor returns in absolute terms and relative to cash, as starting yield curves are very flat.
- In the corporate bond market, duration has risen and quality has deteriorated. Expected investment grade returns are lower, primarily due to a renewed drag from interest rate normalization.
- Inclusion of the Gulf Cooperation Council in the J.P. Morgan EMBI Global Diversified Index has increased the quality and duration of the emerging market debt index, but expected total returns have come down due to lower rates and tighter starting spreads.
Anticipating continued central bank dovishness, we shift our equilibrium interest rates lower across major G4 markets and extend the time horizon over which we expect rate normalization
STANDARD G4, IG, HY AND EMD FIXED INCOME RETURN PROJECTIONS