Over the past decade, investors in US debt securities have had a good run, boosted in recent years by the Federal Reserve’s gradual interest rate tightening. While the global economic climate should remain favourable for fixed income securities over the foreseeable future, we see the seeds of significant macro shifts over the longer term.
Specifically, we are watching four trends:
• Global rate normalisation. Rate normalisation in the US has been a major theme across fixed income markets during the past several years. Higher rates now may be ahead globally, as the European Central Bank (ECB) as well as the Bank of Japan (BOJ) appear poised to begin tightening sometime in 2019 or 2020.
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