Fixed Income Outlook: Jan 2021

Credit Market Optimism in 2021?

January's selection of fixed income papers includes subsections on several sectors of the fixed income market, including private placement debt, high yield, and emerging market debt, as well as papers on the broader outlook for the asset class over the course of 2021.

Economic fundamentals may be improving, but several questions remain unanswered – How have the ripple effects of Covid-19 affected public finances and the health of municipalities? Will CMBS recover just as slowly as the underlying commercial real estate market? And perhaps most importantly, how far will credit market optimism carry forward into the new year?

PRIVATE DEBT

Seeking Income – The case for private corporate debt (M&G Investments, 2021)

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

In this paper, M&G Investments makes the case for a strategic exposure to private corporate debt for pension funds. This is due to funds’ specific cashflow requirements and certain unique characteristics of the asset class.

Private Placement Debt Investments (MetLife Investment Management, Dec 2020)

In this comprehensive report, MetLife IM describes the characteristics of private placement debt investments, dispelling myths, and highlighting its importance as a source of funding for corporations.

EMERGING MARKET DEBT

Emerging Market Debt Outlook for 2021 (Capital Group, Dec 2020)

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

Capital Group presents four factors driving the performance of emerging market debt in 2021 – the global macro environment, EM fundamentals, geopolitics, and the path of the coronavirus.

Emerging Market Debt: Finding value in a time of pandemic (Vanguard, Dec 2020)

In this brief article, Vanguard delineates some of the key differences in the economic fundamentals of sovereign debt issuers in emerging markets.

Webinar: Asian fixed income 2021 – Reasons for optimism (Manulife IM, 2021)

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

In this webinar, Manulife IM discusses why Asian fixed income could be set to shine in 2021. Attractive yields, economic growth, and a potentially weaker dollar could set the stage for this outcome.

The Outlook for Emerging Market Debt in 2021 (Aviva Investors, Dec 2020)

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

Liam Spillane of Aviva Investors reviews three themes impacting the outlook for emerging market debt in 2021 – liquidity, uneven recoveries, and debt sustainability.

BROADER FIXED INCOME OUTLOOK

Q1 2021 Outlook (PGIM Fixed Income)

From a global monetary policy standpoint, the effects of 2020 will play out for years to come, but at present the outlook is broadly positive for fixed income assets, given improvements in the global economy, asset valuations, and inflation expectations.

Fixed Income Handbook: 2021 outlook (Wells Fargo AM, Dec 2020)

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

Wells Fargo AM offers their viewpoint on the outlook for fixed income assets in 2021. From their perspective, it should be a year of capital protection and income maximisation for fixed income investors.

Brightening Outlook Propels Credit Market (Pinebridge Investments, Jan 2021)

According to PineBridge Investments, December 2020 valuations within the bond market reflect a brightening outlook and optimism that a path towards viral recovery and earnings recovery both exist.

The Outlook for Investment Grade Credit in 2021 (Aviva Investors, Dec 2020)

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

Portfolio managers of investment grade bonds at Aviva Investors discuss three themes shaping the course of the asset class in 2021 – US politics, M&A activity, and central bank stimulus measures.

Video: The Fed's robust toolkit (Northern Trust AM, Dec 2020)

In this brief video, Peter Yi, Northern Trust AM's Director of short-duration fixed income, reviews the results of the latest FOMC meeting and the outlook for fixed income in 2021.

HIGH YIELD

The Outlook for High Yield in 2021 (Aviva Investors, Dec 2020)

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

Several high yield portfolio managers from Aviva Investors look at three themes shaping the outcomes of high yield assets in 2021 – improving fundamentals, zombie revival, and monetary policy.

High Yield for Insurance Companies (MetLife Investment Management, Dec 2020)

Due to declining credit quality in 2020, insurers have likely seen their exposure to high yield increase. MetLife IM discusses insurers' optimal exposures to HY and bank loans, and other factors that they should consider when investing in these assets.

Staying Defensive in the Junk Bond Market (Nuveen, Dec 2020)

As Nuveen describes in this paper, one of the keys to better performance within the junk bond market may have more to do with avoiding losers than picking winners. This means adopting a relatively defensive stance.

OTHER FIXED INCOME ASSETS

Podcast: The outlook for municipal bonds (PGIM Fixed Income, Dec 2020)

In this All The Credit podcast episode, PGIM Fixed Income covers the outlook for the municipal bond market in 2021, paying particular attention to how cities and states in the US have been affected by the pandemic.

Good in Parts: 2021 CMBS and the COVID rebound (FTSE Russell, Dec 2020)

How have commercial mortgage-backed securities (CMBS) been affected by Covid-19 and how will they be impacted by the vaccine? FTSE Russell delves into the implications for the real estate sector and for related fixed income securities.

European Loans: As varied as Bertie Bott’s beans (Janus Henderson, Dec 2020)

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

Portfolio managers and secured loan specialists at Janus Henderson Investors opine about the wide-ranging utility value of European loans.

The Outlook for Convertible Bonds in 2021 (Aviva Investors, Dec 2020)

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

Shawn Mato, fund manager at Aviva Investors, picks up on three themes governing the performance of convertible bond portfolios in 2021 – volatility, issuance, and support from equities.