Flash Fixed Income

The incoming German government’s removal of the country’s infamous “debt brake” is a serious pivot for the typically fiscally conservative country, and one that we think highlights the value on offer in European assets.

Since the Federal Reserve first cut interest rates in September, we have seen the most aggressive rise in US Treasury yields of any cutting cycle over the past 40 years.

Will volatility in government bonds continue? Has fixed income seen “peak ESG”? And what will be the biggest driver of returns?

Spread tightening has left some market participants nervous about fixed income valuations going into 2025, but we think the drivers of recent credit performance are unlikely to weaken materially in the coming months.

In this month's Flash Fixed Income, we look at how bond markets are reacting to Donald Trump's victory in the US election. With Trump's stated policies widely regarded as being inflationary, we expect a bigger divergence in the path for interest rate cuts between the US and Europe that might favour higher quality European credit.

In this inaugural edition of Flash Fixed Income, we look at the highly unpredictable US presidential election and explain why a potential second Trump administration could limit the Federal Reserve’s ability to deliver more rate cuts.