Fixed Income

Johnathan Owen, Portfolio Management, defines the second quarter of 2024 as another interesting period for financial markets, marked by the first rate cut from the European Central Bank (ECB) in June and President Macron's snap election announcement in France. He outlines what these meant for the Investment Grade (IG) team.

There is little disagreement among investors and economists that the last few years have been highly unusual in many respects. An inflationary shock in developed markets, one of the fastest rate hiking cycles on record, the worst year in decades for government bonds (2022), and mild recessions with no movement in unemployment are just a few of the dynamics that have strayed from recent norms.

After weeks of volatility following President Emmanuel Macron’s decision to call snap parliamentary elections in France, markets were breathing a sigh of cautious relief on Monday after the far-right Rassemblement National (RN) underperformed the polls.

One of the drivers of the dovish pivot from the Federal Reserve (Fed) in December was the acknowledgement that the risks to the policy outlook had become more two-sided. In other words, while higher rates were still needed to tame inflation, the Fed saw a risk that staying restrictive for too long and risk damaging a labour market that has so far shown remarkable resilience.

Having been the best performing asset class across fixed income in 2023, collateralised loan obligations (CLOs) have spent the first half of this year on similar form with record levels of issuance meeting equally strong demand from a broadening range of investors.

The forecast-defying strength of the US economy has been one of the key drivers of financial markets in recent quarters, but as economic prospects diverge, Europe is where we see the better relative value in fixed income today.

For any fixed income investors that follow the England football team, the plan for H2 2024 may feel somewhat familiar – no substitutions in the second half.

Securitisation made its latest appearance in the mainstream financial press this week with the news that the European commercial mortgage-backed security (CMBS) market is set to experience its first losses on AAA bonds since the global financial crisis.

In this Back to Basics webinar, Gordon Shannon (Partner, Portfolio Management) and Johnathan Owen (Portfolio Management) from our Investment grade team provided a comprehensive understanding of the key aspects of corporate hybrids.

On this webinar, Eoin Walsh (Partner, Portfolio Management) provided a macro update on fixed income markets, why he thinks credit spreads could remain resilient and how these views impact duration positioning.

In the first week of June, the European asset-backed securities (ABS) market participants flocked to sunny Barcelona for the 28th Global ABS conference.

For the fixed income fanatics amongst us, June was always going to be one for the books with all three of the major central banks meeting, elections, and continued data.