Fixed Income

It has been a busy year in fixed income markets, with Q4 2024 proving to be a pivotal period marked by significant global events, including the US election. TwentyFour Asset Management’s Eoin Walsh looks at the path for interest rate cuts in 2025.

Trade wars and geopolitical risk head a list of potential catalysts for spread widening in 2025. However, with a macro backdrop of falling rates and solid global growth, we think credit will continue to outperform government bonds and support healthy total return expectations for fixed income investors.

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

Given modest interest rate cut projections, a stable if not stellar macro backdrop and better relative value than corporate credit, we think European ABS investors can expect another strong year of supply and returns in 2025.

The Net Zero Banking Alliance (NZBA) has been the flagship climate initiative for banks to advertise their commitment to aligning their investment and lending portfolios with net-zero targets by 2050 or sooner. However, in recent weeks the NZBA has been hit with the withdrawal of all its major Wall Street banks.

It has been a busy start to 2025 in fixed income markets. After the Federal Reserve’s (Fed) hawkish December dot plot, which added fuel to a sell-off in rates last month, you might have thought primary market activity would be more cautious than both issuers and investors would have anticipated a month ago.

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.

With a macro backdrop of falling rates and solid global growth, TwentyFour Asset Management's Eoin Walsh says fixed income investors can expect healthy total returns in 2025.

With fresh uncertainty surrounding the path for interest rate cuts, we believe the high current income and typically lower volatility offered by European asset-backed securities (ABS) and Collateralised Loan Obligations (CLOs) make them an attractive allocation option for this stage of the cycle.

It is important to understand the historical context behind “global” capital rules, and why they differ for EU and US banks.

An asset-backed finance (ABF) investment backed by a portfolio of Dutch unsecured consumer loans originated by Qander Consumer Finance.

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.