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May 2019 Fixed Income Outlook

May 2019 Fixed Income Outlook - Top Papers

If (or when) corporate earnings begin to deteriorate, and a US recession becomes more likely, will a wave of 'fallen angels' wreak havoc upon fixed income portfolios?  Or, more immediately, will trade-related volatility spell opportunity for emerging market debt investors? 

In addition to a broad-ranging outlook, the below fixed income outlook papers cover many issues relevant to fixed income sub-asset classes, including European ABS, floating-rate loans, high yield, and structured credit. 

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High Yield: Dealing with Fallen Angel Risk (Moody's, 2019)

With the prevalence of investment grade bonds rated Baa, a near-term US recession could lead to a much greater incidence of fallen angels (downgrades in corporate credit quality from investment grade to high yield).

Quarterly Outlook, Q2 2019 (PGIM Fixed Income)

This Q2 Outlook from PGIM Fixed Income takes a sector-by-sector look at fixed income markets, examining factors that support global growth as well as other conditions that might affect Q2 performance.

Q2 2019 Bond Compass: Positioning for Patience (SPDR)

For compliance reasons, this paper is only accessible in the United States

This quarter’s issue of Bond Compass contains data on bond flows from Q1 2019, updates on global inflation levels from a proprietary inflation gauge, an interview with a short-term fixed income portfolio manager, and three potential investment themes for Q2.

Q2 2019 Bond Compass: The Future of Bond Trading and Technology (SPDR)

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

This quarter’s issue of Bond Compass contains data on bond flows from Q1 2019, updates on global inflation levels from a proprietary inflation gauge, three potential investment themes for Q2, and a panel discussion on technological changes affecting the bond market.

Giving leveraged credit the credit it is due (Eaton Vance, Apr 2019)

For compliance reasons, this paper is only accessible in the United States and Canada

Eaton Vance reviews the effects of Q4 2018 and Q1 2019 on the leveraged credit market, as well as a broader discussion of historical default rates for floating rate loans and high yield bonds.

Re-examining the relationship between EMD and the dollar (Aviva Investors, May 2019)

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

Several assumptions related to the relationship between the US dollar and emerging market debt are now being challenged.

China's Debt Problem (Matthews Asia, Mar 2019)

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

Cleaning up China’s debt problem will be expensive, but is unlikely to result in a hard landing or banking crisis.

European Debt Disputes Make an Unhappy Union (Franklin Templeton, May 2019)

For compliance reasons, this paper is only accessible in the EMEA region

Is a fiscal union the answer to European tensions over sovereign debt issuance? Franklin Templeton examines fiscal transfers in a historical context, as well as the outlook for Italian and Spanish sovereign bonds.

A New Dawn for ABS (NNIP blog, May 2019)

Despite the negative reputation of ABS since the onset of the GFC, European ABS has performed well of late. NNIP details changes to the ABS market under Solvency II and the implications for insurance investors.

Economic & Market Observations: Powell the Padawan (Mellon Capital, May 2019)

Chief Economist Vincent Reinhart examines the U.S. economy and the Fed's change of heart.

Fixed Income Monthly (Fidelity International, May 2019)

For compliance reasons, this paper is only accessible in the UK & Europe

The Fixed Income Monthly provides a forward-looking summary of the medium-term views from the Fidelity Fixed Income team.

360 Degrees: Fixed Income Quarterly Report Q2 2019 (Hermes IM)

In this edition of 360°, the fixed income team at Hermes provides a broad-ranging quarterly outlook for a large swath of the credit spectrum, including private debt, structured securities, leveraged loans, and asset-based lending.

Where Next? Our Post-Recovery Outlook for Emerging-Market Debt (AB blog, May 2019)

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

The authors discuss the strong start for emerging market bonds in 2019, and the likelihood of further gains for this asset class over the remainder of the year, despite (or resulting from) additional trade-related volatility.

Fixed Income Asset Allocation Insights: Improving Economy and Tightening Spreads (PineBridge, May 2019)

PineBridge provides their latest strategic update on fixed income asset allocation, focusing on the Q1 earnings picture and tightening spreads across many fixed income markets.

Invesco Fixed Income Multi-Sector Asset Allocation Outlook Q2 2019

Invesco's top-down Q2 fixed income outlook begins with a macro overlay, followed by their regional and currency stance, before moving into strategic recommendations for fixed income sub-asset classes such as IG credit, HY, EM, munis, structured credit, and bank loans.

The challenge of investing sustainably in sovereign debt (Fidelity Intl blog, Apr 2019)

For compliance reasons, this paper is only accessible in the UK & Europe

How is it possible for investors to engage with governments on sustainability-related issues? While much more difficult than engaging with corporate entities, sovereign engagement can lead to cheaper financing, as well as other positive outcomes.

Putnam Quarterly Global Fixed-Income Outlook

From Putnam Investments, a quarterly analysis of global bond markets. This is the latest in a regular series of quarterly reports.

EMD Valuation Update Q1 2019: Valuation Metrics in Emerging Debt (GMO)

GMO discusses three themes within the emerging market debt market that were evident during Q1 of this year.