Multi-Sector Bond Quarterly Update – July 2024

Pierre Beniguel, Portfolio Management, from our Multi-Sector Bond (MSB) team takes us on a journey through market sentiment. He highlights its strength in Q1, the reversal in Q2, and the pivotal role of upcoming data as the main driver of risk sentiment moving forward.

Key takeaways: 

Mixed sentiment 

• Sentiment was relatively strong in Q1 due to expectations of rate cuts from central banks supporting good spirit in the market
• However, Q2 saw a reversal of this strong sentiment due to stronger ISM manufacturing data and weaker labour data than was expected
• The higher for longer sentiment led to a reduction in expected rate cuts from central banks for the remainder of the year  

Inflation data

• Inflation data came in hotter than anticipated which led Federal Reserve (Fed) officials to call for patience with rate cut expectations
• This led to a rise in rates from 4.2% at the beginning of the quarter to 4.7% at the end of April  

Market outlook  

• Upcoming data will be the main driver of risk sentiment 
• The MSB team tactically reduced exposure to Additional Tier 1s (AT1s), and increased their allocations to AAA Asset-Backed Securities (ABS) and insurance