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.
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.
Despite a slight pullback in equity markets, the high yield market has been relatively unscathed. We think investors will rightly continue to buy the dip but that it will pay to be increasingly selective.
The recovery in Europe has been lambasted for trailing the US rebound, but the gap has now narrowed, which should bode well for the euro.
The surprisingly weak headline US jobs number and the surprisingly strong jump in inflation may not tell the whole story – and are unlikely to change the Federal Reserve’s stance.
With expected strong data already priced in, any near-term downside surprises could make the market more sensitive to weak data than it is to strong data, although the long-term bias remains to higher yields and steeper curves.
In a positive environment for risk assets, CCC-rated bond yields in the US have reached record lows, while yields in Europe have also come down materially. We assess whether this can continue.
Fundamental risks are ever-present, but the growth backdrop looks supportive for emerging market debt.
With US Treasury yields settling into a range recently, we assess what factors could push rates materially higher or lower.
With the recovery from the pandemic well underway, we believe defaults have peaked in credit markets, while even some of the most Covid-impacted credits have been able to access capital markets. The path looks clear for further spread tightening.
While there are risks that investors should be aware of, emerging market debt continues to present attractive opportunities.
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.
Our quarterly EMD strategy report assesses the latest economic developments in emerging markets and sets out our base case scenario for the asset class
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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