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There is good reason for fixed income investors to be positive as we move into 2024, although there is also reason to remain cautious. The welcome news is that inflation globally has finally started to fall after remaining stubbornly high for most of 2023.

With most central banks presumably at highs in terms of monetary policy rates during the current cycle, the focus has rightly shifted to the timing of the first cut. 

Last year saw returns in European high yield (HY) of approximately 12%, driven by tighter spreads (-102bps) and lower government bond yields (five-year bunds were -59bps).

Douglas Charleston, believes 2024 will continue to provide the carry that has been so welcome, but see market growth and diversity continuing to make European ABS increasingly scalable. 

2023 proved to be a second year where European ABS gave investors the strongest returns in fixed income with the benefit of very low volatility. As risk-free rates grew to what we expect to be the peak, income was maximised whilst the various market pivots on rates came and went in the rear view mirror.

December’s CPI inflation report showed numbers slightly ahead of consensus in the US. On a month-on-month basis, headline CPI came at 0.3% compared to a Bloomberg consensus of 0.2%, whereas core CPI figures were in line with said consensus at 0.3%.

We recently highlighted in our 2024 outlook our expectations of significant inflows into fixed income to be an important technical driver of performance in the year ahead.

In a particularly noteworthy start to the year, we have seen the UK take the lead in the ABS primary markets, with two UK master trust RMBS deals pricing in the first week of January,

TwentyFour Asset Management, the London and New York-based specialist fixed income investor, has announced the appointment of a new partner from within its marketing team.

The solid end to 2023 for financial markets has influenced a positive start to 2024.

The ECB's annual SREP results revealed a resilient European banking sector. Jakub Lichwa discusses that despite facing headwinds in 2023, the overall scores for 106 institutions remained steady at 2.6, with 71% of these institutions maintaining their scores, while 15% showed improvement.

The tightening of monetary policy has given rise to concerns about the health of mortgage markets due to higher interest rates , leading to questions about the expected resilience of residential mortgage-backed securities (RMBS).