TwentyFour

The first two trading weeks of the year are coming to an end and unlike previous years they have been packed with activity.

As we enter the third year of the pandemic, most market participants are asking themselves (once again) if this will be the year when supply chain issues finally abate.

Given the swiftness of the Fed’s pivot we think risks are tilted towards the central bank doing more and not less. We wouldn’t even rule out a 50bp rate hike at some point.

As we enter the New Year, we say goodbye to an old “friend” that has accompanied us (for better and for worse) since the inception of the UK ABS market in the late 1980s – Sterling LIBOR.

As bondholders, we are comforted by all the banks passing such a severe test.

Jerome Powell’s recent testimony to the Senate Banking Committee, in which he said the Fed would discuss a faster taper of its asset purchases at December’s FOMC meeting, has led to intense speculation that we could see a move this week.

Against a backdrop of 4.20% year-on-year UK consumer price inflation (CPI), if you got your timing right, linkers (inflation-linked UK government bonds) will certainly have outperformed conventional Gilts by some margin.

The labour market in the US shows little sign of weakening, despite the huge number of jobs already created this year.

Markets have clearly experienced some periods of volatility this year, and while European CLOs haven’t been immune to this, both fundamentals and prices have been remarkably stable.

Emerging markets assets have endured a lot of punishment during 2021.

With floating rate assets likely to be high on investors’ shopping lists for 2022, Doug Charleston looks at the floating rate options across fixed income and highlights the highest yielding opportunities.

Fundamentally the outlook for 2022 appears less supportive than it was 12 months ago.