Fixed Income – Page 10
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White papersJuly 26-27 FOMC Review: Maintaining a Hawkish Course
The Federal Reserve hiked the fed funds rate by 75bp to 2.25-2.50%, the second consecutive 75bp rate hike. The Fed rate decision was widely expected. With today’s rate hike, the fed funds rate is within the 2 to 3% range of estimates of the long-term “neutral” rate. However, as Chair Powell reminded us during his press conference, policy needs to go beyond neutral into restrictive territory this year in order to reduce inflation.
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White papers
High Yield: When Technicals Create Opportunity
Challenging technical conditions have caused high yield spreads to widen beyond what fundamentals would suggest, potentially setting the stage for strong performance in loans and senior secured bonds, in particular.
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Three Reasons to Consider CLOs
The combination of wider spreads, strong structural protections and low interest-rate sensitivity presents a potentially compelling case for CLOs.
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Compass - Mind the lag: recession fears flare too fast
Investors expect central banks will tame inflation whatever the cost, even triggering recession if necessary. This may indeed be policymakers’ approach in the short term as they seek to re-establish their credibility. The European Central Bank’s decision to raise rates by 50 bps is a case in point.
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Inflation is Hot—and Could Stay Hot
Autumn and winter should bring respite from the northern hemisphere’s punishing summer heatwave, but we don’t think they will ease the inflation temperature.
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ECB meeting: larger-than-expected rate hike, with new fragmentation tool outlined
What is your take on the July ECB meeting and what could the next steps be?
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White papers
Whiplash!
Hard economic data has remained strong, but recession risks are on the rise. Combined with limited forward guidance from Central Banks, this has left markets to have to decipher what each data print will mean for monetary policy and the path of rates.
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CLO Monthly Overview
In this monthly report, we provide an overview of the current US CLO market, covering CLO issuance, performance, rating updates, and CLO manager performance. We discuss the current market risks and challenges, and highlight emerging themes and trends.
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Midyear Strategic Investment Outlook: What Does the Market Move Mean for Strategic Investors?
Many people say they like to be long-term investors. It’s a laudable ambition, but often the short term gets in the way. Our notes typically focus on the strategic horizon, but when the S&P 500 falls by 20%, 10-year Treasury yields rise by 140 basis points and Bitcoin is down by 60% since the start of 2022, strategic investors need to respond.
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Dealing with income bias in sovereign ESG scores - Sovereign ESG revisited
Although the use of sustainability metrics in sovereign fixed income markets is becoming more mainstream, there is a lack of consensus on how to appropriately assess countries’ environmental, social and governance performance.
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White papers
Global High Yield — Recent Rout Provides Attractive Entry Point for New Allocations
High yield markets took a significant turn during June and consequently spreads, sentiment and distress levels deteriorated quickly. The Fed’s outsized 75bp hike and a surprise contraction in consumer spending in recent weeks drove concerns for retailers specifically. Investor flows have also been negative.
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Transition To a Net-Zero Carbon Economy: How Insurers Contribute To Green Finance Via Sustainable Bonds
The sustainable bond market recorded another tremendous year of growth in 2021, with €960 bn of bonds issued. This represents an increase of 80% vs 2020. This strong market expansion is being driven by institutional investors, for whom combating climate change and seeking positive social impacts have become strategic challenges.
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White papers
Market Scenarios and Risks - July/August 2022
We keep the probabilities of our central and alternative scenarios unchanged vs. last month. The new wave of Covid-19 and stagnation in the Eurozone are adding growth uncertainty over the short-term.
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Macroeconomic Picture - July/August 2022
United States: signs of decelerating growth are increasing as high inflation bites into consumers’ disposable income and companies’ margins. While we do not see activity contracting in Q2, risks to our projections remain on the downside. We do expect the US economy to grow below potential between now and yearend and to remain on a similar sub-par growth trajectory into 2023, as tighter monetary policy impacts the most interestrate-sensitive sectors of the economy.
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The ECB’s ability to raise rates will depend on the strength of the antifragmentation tool
The ECB is determined to tighten its monetary policy in the face of record high inflation levels. However, it is addressing that risk by cooling inflation down or pushing the economy into recession or triggering a spike in peripheral debt borrowing costs, as in 2012.
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Energy Fuels European Inflation & Rate Fears
U.S. labor demand remains strong but has likely passed the peak imbalance with supply, while the Fed has reaffirmed its prioritization of inflation over growth. Elsewhere, talks of greater hikes by the ECB followed inflation surprises in Europe. All eyes are on U.S. CPI next week.
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White papers
Fixed Income Insights - July 2022
Bond investors were unnerved in the second quarter as major central banks signaled a more aggressive monetary tightening in their fight to prevent inflation from spiralling out of control, making a global recession more likely. Long-dated conventional and inflationlinked bonds have posted the biggest declines. Credit also fell, especially euro high yield bonds.
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White papers
Fixed Income Insights (China Edition) - July 2022
Chinese government bonds continued to deliver positive returns in local currency in June, and remained top performers in US dollar terms year-to-date, despite some currency weakness. Chinese sovereign vs US Treasuries spreads stayed negative. Chinese $ high yield negative YTD returns doubled in Q2.
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White papers
Fixed Income Insights (Canada Edition) - July 2022
Welcome to Performance Insights (Canada Edition), the monthly Market Maps report that provides actionable insights on currency-adjusted performance, macro drivers, shifts in yields, spreads and curves across conventional, inflation-linked, and corporate bonds within the Canadian fixed income market.
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White papers
Into the Inflationary Slowdown
As inflation persists and recession risks rise, our Asset Allocation Committee sees more yield potential in fixed income and favors commodities for ongoing inflation exposure, but remains cautious in equities.
