In an uncertain market environment, fixed income is once again taking centre stage. With inflation expectations, policy paths and regional divergences shifting rapidly, investors are increasingly looking for solutions that can deliver both stability and income. In this context, an active fixed income approach can offer a compelling answer: one that combines discipline, flexibility and the ability to respond quickly to changing market conditions.
The European fixed income spectrum offers a broad range of opportunities. We take a tour of the European fixed income universe to see the different contributions to portfolio construction and the vital role of fixed income in strengthening European autonomy.
Structural changes in the Euro sovereign market
Anne Beaudu, Senior Portfolio Manager, Euro & Global Aggregate strategies
After many years of disinflation, zero to negative interest rates and quantitative easing (QE), bond markets have experienced dramatic shifts since the Covid pandemic. To face the post-Covid inflation surge, amplified by rising commodity prices following the Ukraine war, central banks were forced to rapidly tighten their monetary policies, just as fiscal policies were expanded dramatically to cushion any economy shock. This led to an abrupt rise in yields, with curves first flattening, and even inverting, before steepening again as central banks were able to normalize back down towards neutral as inflation slowly drifted down.The steepening was amplified by a renewed market focus on fiscal policies and debt paths, as fiscal dominance became a theme and term premium normalized after years of compression due to QE policies.
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