Income

The high yield bond market reopened in Europe last week after a three-week hiatus triggered by the US tariffs fallout. Aside from a private placement by Very Group on April 10, the last public European high yield deal was from UK homebuilder Miller Homes on March 31, so we were interested to see how the first post-tariffs deal would be received.

One of the key reasons we see credit continuing to outperform government bonds over the medium term is corporate fundamentals.

Last week’s rise in UK government bond yields prompted the bonds of UK financial institutions, both banks and insurers, to underperform other regions, a trend also seen in the equity market.

We saw a sell-off across the UK Gilt curve on Wednesday with yields rising by 4bp at the short end and 11bp at the long end. This took the 10-year Gilt to 4.80% and the 30-year Gilt to 5.35%, with the latter bringing the unwelcome headline that UK borrowing costs are at their highest since the last century.

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.

A lot has happened since our last blog about the state of affairs in the European High Yield (HY) market. At the time, the sector had just seen three of the largest capital structures of Altice France, Ardagh Group and Intrum AB announce restructuring advisors in quick succession, with growing fears that it would represent the start of a wider default trend.

Yesterday the European Central Bank (ECB) delivered a 25 basis point (bp) cut, their second in the current easing cycle and in line with market consensus.

We struggle to recall a more eagerly awaited US labour market report than that published last week. Stakes were high given the previous report showed a steep rise in unemployment and caused market mayhem in early August, but anyone hoping for a conclusive picture was left disappointed as a mixed set of figures left the strength of the US economy open to interpretation.

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.

The global financial crisis was a seismic shock to banking systems globally, and triggered a regulatory marathon with banks having to adapt to a far stricter set of rules (known as Basel III) set out by the Basel Committee on Banking Supervision (BCBS).

In spite of what looks like a quiet week ahead, there are a couple of data releases in the coming days that require close attention, these releases could potentially disturb the fragile calm that we are enjoying in the first trading hours of the week.

The UK’s Office for National Statistics (ONS) released their monthly inflation report this morning. In spite of April’s numbers showing a marked decrease in most inflation measures, it is fair to say that the report was significantly worse than expectations.