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Fixed Income: Latest Research from top managers

How should bond portfolios be positioned in 2020?

In common with many other asset classes, global bond markets performed well last year, spurred on by the abrupt pivot in rate policy by the US Federal Reserve. However, some commentators are beginning to question whether the bull market in bonds can continue, as global economic growth begins to pick up and scope for further rate cuts seems limited. The papers below contain a wide range of views, as to where and how fixed-income investors should position portfolios, given the uncertain market backdrop.

This collection of recent research papers on the fixed income asset class offers some perspectives on the outlook for 2020 as it applies specifically to bond markets. Savvy Investor has also included other thought leadership articles that cover diverse topics that range from a critique of the ineffectiveness of monetary policy measures, through to alpha generation techniques and how climate risk may eventually work its way into sovereign risk.

exotic currency notes

The failure of monetary stimulus (JP Morgan AM, 2019)

JP Morgan AM assesses the effectiveness of both conventional and unconventional monetary easing by central banks after the financial crisis.

Comparing the investment cases for European and US leveraged loans (M&G Investments, 2019)

For compliance reasons, this paper is only accessible in certain geographies

M&G Investments investigates the leveraged loan market, identifies the similarities and differences between the European and US markets, and suggests why investors should consider an allocation to European loans within the context of a diversified investment portfolio.

Fixed Income: Conclusions from the recent Global Investors’ Summit (Invesco, Jan 2020)

For compliance reasons, this paper is only accessible in certain geographies

Invesco presents the conclusions from their Fixed Income summit, held in Houston in November 2019.

Quarterly Outlook (PGIM Fixed Income, Jan 2020)

PGIM Fixed Income offers their perspective on the outlook for bonds and the global economy.

Fixed Income Outlook: Keep an Eye on Systemic Risks (AB, Jan 2020)

For compliance reasons, this paper is only accessible in North America and South America

AB offers their perspective on the outlook for bonds in 2020, noting several systemic risks that are impossible to ignore. They debate whether fixed income markets can generate acceptable returns without requiring investors to accept higher amounts of risk.

The 2020-2024 EM Fixed Income Outlook (Ashmore, Dec 2019)

Ashmore offers its unique perspective on the outlook for EM fixed income markets for both 2020 and the period from 2020-2024.

Emerging Markets Debt Monitor, Q4 2019 (Eaton Vance)

For compliance reasons, this paper is only accessible in certain geographies

Eaton Vance's detailed emerging markets (EM) update provides a comprehensive view of the EM landscape.

Hard and local currency EM bonds provide different routes to returns (Capital Group, 2019)

For compliance reasons, this paper is only accessible in certain geographies

Capital Group offers its insights into the emerging market (EM) bond asset class and considers the attributes of both hard and local currency bonds and the relative benefits that each can bring to a portfolio.

U.S. Fixed Income Outlook: Live your best life (BMO GAM, Dec 2019)

BMO GAM wonders what is left 'in the tank' for bond markets, in their U.S. Fixed Income Outlook paper.

How could climate change impact sovereign risk? (FTSE Russell, 2019)

FTSE Russell introduces the concept of climate risk and how that might translate into sovereign risk. Given their often decades-long time horizons, bond investors should be mindful of the potentially material effects of climate change.

Factor Investing in Equities and Corporate Bonds: Neutralising Bias (BNP Paribas AM, 2019)

BNP Paribas AM notes that successful factor investing can be applied to both equity investing and corporate bond investing too. However, factor exposure needs to be controlled.

Currency Exposure in Fixed Income: To Hedge or Not To Hedge? (PineBridge, 2019)

Pinebridge investigates whether fixed-income investors should hedge currency exposure within portfolios and outlines why many choose not to do so.

Managing liquidity risk in multi-asset credit portfolios (Hermes IM, 2019)

Hermes IM discuss their approach to capturing some of the illiquidity premium present in a multi-asset credit strategy.

Has global sovereign rates momentum headed in reverse? (MSCI blog, 2019)

In this article from MSCI, they note that momentum factor strategies within sovereign bonds have proved both popular and rewarding over both short and more extended investment horizons. However, they also question that with little scope remaining for additional rate cuts, the 'momentum trade' in sovereign bonds may be almost over.

FTSE Fixed Income Factor Research Series - The Carry Concept (2019)

FTSE Russell investigates the 'carry trade' as it pertains to bond markets, noting its success in sovereign bond markets from 2007-2018 and suggesting that the 'carry factor' may also exist within the corporate bond market, though it was less stable.