Fixed Income

Following a turbulent week for rates markets, Eoin Walsh outlines what investors can expect as the Bank of England and other central banks meet this week.

With a student housing CMBS deal recently brought to market, Kevin Law evaluates the sector’s outlook in the aftermath of COVID-19

With all eyes on November 3 and the Fed’s next move, Paul Kim looks at supply chain disruption in the US and how its cost pressures have shifted the narrative on ‘transitory’ inflation.

After a mixed start to Q4 for risk assets, Elena Rinaldi examines how European ABS and CLO assets have fared so far in Q4 and the factors currently affecting both markets.

Let’s not forget that the BoE dropped rates from 0.75% right down to 0.1% at the start of the COVID-19 pandemic back in March 2020, having only managed to put through two hikes in 2017 and 2018. It has changed course sharply before.

While bank treasurers may have to work a bit harder this year-end to formulate wholesale funding plans, the ABS market that they may be more reliant on going forward is experiencing a strong resurgence, which should ease the process of weaning off central bank funding.

This looks to us like a buy-into-the-dip opportunity, but investors should be wary of taking on too much rate sensitivity as the move in risk-free curves is likely to persist until the rate hike cycle is actually on the way.

From time to time, Treasury yields actually become the source of risk for financial markets.

On Wednesday, the Fed moved one step closer to tapering and even put quite a clear timeframe for it, while on Thursday, the Bank of England openly talked about rate hikes.

It will take time for this sector to recover and we are likely to see more suppliers collapse in the coming weeks and months.

Our base case is for a continuation of quite high growth and a modest inflation overshoot. For bond investors, positioning for stagflation could be a dangerous trade if that base case bears out

With ample job openings, inflation well ahead of target, financial conditions that are certainly not tight and strong economic growth, the obvious question is what does the Fed need to see to finally start tapering its asset purchases?