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Fixed Income: Walking a Tightrope

How High, and How Fast, Will Rates Move?

After the 50-basis point move by the Federal Reserve at the May meeting, and chair Powell's comments that 75bps moves were not being considered, it seems as if markets await a succession of further 50bps moves. But how many and for how long? Some commentators thought taking the 75bps option off the table was premature, especially as April's inflation number moderated only slightly. Less severe hikes may leave the Fed still scrabbling to get control of inflation, while others want the ‘nasty medicine’ of 75bps hikes done early and quick. The Fed has a tightrope to walk, raise too fast and potentially create a recession, or stay behind the curve and fail to quell inflation.

tightrope-sunset

Fixed Income Outlook Q2 2022 – To neutral and beyond (BNP Paribas AM)

BNP Paribas anticipates U.S. interest rates to be raised to 3.25%-3.50% by the end of the year, potentially instigating a recession, in an attempt to quell rampant inflation.

Embracing the Great BBB Convergence (Insight Investment, Feb 2022)

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

Insight Investments notes the structural shift in the corporate bond market, which is gradually moving from debt issued by high-quality names with at least an A credit rating, towards a Triple B rating as corporates take advantage of the low yields available there.

Invesco's Fixed Income Multi-Sector Asset Allocation Outlook Q2 2022 (Invesco)

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

Invesco sees inflation as potentially remaining high for an extended period, which will see central banks remaining vigilant and committed to further rate increases for the remainder of the year.

Private Credit in Focus (BlackRock, 2022)

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

In February, market participants dealt with a familiar market catalyst while contending with a new major market catalyst. On the familiar side, early in the month, the ECB and BoE communicated the desire to tighten monetary policy, joining the Federal Reserve’s view that it is appropriate to remove a degree of policy accommodation. On the new catalyst, Russia’s invasion of Ukraine introduced additional market volatility.

Fixed Income Perspectives: April 2022 (Capital Group)

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

Capital Group provides its quarterly macroeconomic and fixed income market insights.

Simplify Global Credit Investing (BlackRock, 2022)

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

Investor desire for income continues to grow, and with it the question of how to source and navigate credit investment opportunities in a continually expanding and increasingly global marketplace. The public and private credit markets below investment grade now stand over $7 trillion, with private credit increasing faster than public markets and growth overall more globally diversified, driven by significant expansion in Europe and Asia.

Fixed Income Outlook (FTSE Russell blog, Apr 2022)

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

Michael Hampden-Turner, Director, Fixed Income Research, offers his insights into the key issues facing fixed income investors, including inflation, central bank monetary policy, and the ongoing conflict in Ukraine. 

Resilience in European Loans (Allspring Global Investments, 2022)

Allspring Global Investors notes the resilience in the European loan market, and they explain why investors may find this asset class appealing and whether such outperformance can continue. 

Structured Credit Solutions (American Century Investments, 2022)

In this paper, American Century Investments suggests why asset-backed securities that are exposed to secular and Covid-19 growth trends, and floating rate instruments offer investors an attractive opportunity set.  

Performing Credit Quarterly (OakTree Capital Management, 2022)

Oaktree Capital explains why today’s more volatile fixed income markets offer investors a range of opportunities and suggests how investors might position themselves to take advantage. 

Muni 360: April view of the municipal bond market (New York Life Investments, Apr 2022)

New York Life provides its comprehensive, 360-degree view of the municipal bond markets. 

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