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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,

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).

The direction of monetary policy rates going forward is more clear, following the Federal Reserve's release of its new summary of economic projections and the dovish remarks of Jerome Powell.

Following October’s encouraging US CPI report and the subsequent comments from Federal Reserve officials, financial markets now anticipate that the Fed has completed its rate hiking cycle having reached terminal rates.

The Chinese economy has experienced a lot of volatility in 2023.

After a horrible year for financial markets in 2022, the macro-outlook for 2023 had a lot of consensus views, with most predicting a much better year ahead, helped by supportive rate cuts from central banks and positive returns from both government bonds and credit.  

The cuts are coming as the cycle of interest-rate hikes ends. In his latest blog, George Curtis discusses how falling inflation, weaker job reports, and signs of a European recession are reshaping expectations for interest rates.