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Fixed Income Markets Outlook

Fixed Interest: Time to Shine?

Supported by concerns about global economic growth, low inflation, the Fed's U-turn and the ECB's resumption of QE, most bond investors enjoyed a positive 2019. However, returns in Fixed Income paled in comparison to many other asset classes.

An extension to the credit cycle is likely, as is continuing investor demand for yield, with a significant proportion of European sovereigns providing negative returns. This may drive money into 'riskier' areas of the bond markets-though the restart of QE by the ECB may provide background support. As this collection of papers suggests, commentators believe that pockets of value do exist among bond markets, it is just that you need to be discerning about where you look and how you approach obtaining it!

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Podcast: Our 2020 credit-sector outlook (Federated Hermes, Jan 2020)

In this episode of Federated Hermes' 'Delta' podcast, Andrew 'Jacko' Jackson, Head of Fixed Income at the firm, discusses with six analysts from the liquid-credit team the fundamental and technical drivers in the sectors they cover.

Why go global when investing in corporate bonds? (Capital Group)

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

This paper by Capital Group argues why investors might want to consider adopting a global approach when investing in corporate bonds, rather than just focusing on regional strategies.

Fixed Income Views: Will the U.S. economy survive the politics? (Franklin Templeton, Feb 2020)

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

In their Fixed Income Views document, Franklin Templeton notes that in 2019, none of the doom-and-gloom predictions materialized. For 2020 they believe that the right investment decisions revolve around three key factors; volatility surrounding US politics, the tug of war that exists between the financial markets and the Fed, and the dangers of adaptive expectations.

What is the Outlook for European Leveraged Loans? (M&G, Feb 2020)

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

M&G reviews the European leveraged loan market and investigates its prospects for 2020.

High-Yield Bonds: An attractive alternative in times of negative interest rates (Qontigo, Feb 2020)

As investors scrabble around for yield, Qontigo argues in favour of high-yield bonds as a diversification tool against sovereign debt (which can be negative-yielding) and more highly rated investment grade credits-some of which barely yield 1%.

Fixed Income: Back to Core - Charts & Views (Amundi AM, Dec 2019)

For compliance reasons, this paper is NOT accessible in the United States

Amundi AM suggests that investors should focus on building a robust core portfolio but also seek higher-yielding opportunities where they meet liquidity and quality measures.

Did corporate-credit factors offer a risk-return edge? (MSCI blog, 2020)

MSCI investigates whether tilting hypothetical fixed-income portfolios toward some bond-specific factors (e.g. carry, low-risk, multi-factor) benefits investors.

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

Hermes IM discusses their approach to capturing illiquidity premium in a multi-asset credit environment, noting that asset allocation and portfolio management decisions can be affected by the lack of liquidity.

Global Fixed Income Strategy (Invesco, Jan 2020)

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

In this paper, strategists at Invesco highlight some of the key themes that they perceive as influential in global fixed income markets. They also outline their strategy across markets.

ESG financial materiality: Integrating ESG into fixed income investments (HSBC AM, 2019)

In this paper, HSBC AM discusses the integration of ESG factors into the investment process, including fundamental analysis of corporate credit and sovereign credit assessment.

Shifting Perceptions: ESG Credit Risk and Ratings (PRI, 2019)

In this paper, Principles for Responsible Investment (PRI) investigates the emerging solutions that investors are considering when attempting to factor in ESG issues into credit risk analysis.

ESG Investing in Corporate Bonds: Mind the gap (Amundi AM, 2019)

For compliance reasons, this paper is NOT accessible in the United States

Amundi AM's informative paper outlines how ESG has impacted the cost of corporate debt and how the investment industry is increasingly integrating ESG into the pricing of corporate bonds.

Overpricing in China's Corporate Bond Market (2020)

The authors of this paper investigate Chinese corporate bond issuances and uncover evidence of issuance overpricing, noting that the yield spread of newly-issued bonds is, on average, 5.35 bps higher than the issuance spread.

Outlook Series: Asian Fixed Income (Manulife IM, Jan 2020)

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

In this outlook paper, Endre Pedersen, Chief Investment Officer, Fixed Income (Asia ex-Japan) outlines the opportunities that he sees in the interest rates, credits and currency segment of the Asian fixed income market. He notes that 2019 provided strong returns across both investment-grade and high-yield credit markets.

Inflation-Linked Bond Outlook, Dec 2019 (BNP Paribas AM)

In this paper, strategists at BNP Paribas AM share their insights into the main economic issues that are influencing prices in fixed income markets.