Asset-Backed Securities Quarterly Update – April 2022
TwentyFour Portfolio Manager, Elena Rinaldi, explains how European ABS markets behaved in Q1 2022 and provides her outlook for the year ahead.
Insights Topic
Macroeconomics
Why inflation risks are still tilted to the upside
With inflation running at 40-year highs in many parts of the world, it is easy to get carried away with making comparisons to the dark economic days of the early 1980s.
Is there value in floating rate bonds?
Last week both the Fed and the BoE hiked rates by 0.25%, and judging by the Fed's dot plots and comments from the Bank of England (BoE), more hikes will likely follow in the coming months.
Powell confirms Fed pivot is complete
Officially the Fed pivoted from its ‘transitory’ inflation rhetoric in December last year.
BoE sounds caution on the real economy
The hawkishness of the Fed on Wednesday paved the way for the Bank of England (BoE) to follow suit.
Wave of inflation means companies will sink or swim on pricing power
Soaring inflation was already a dominant theme for markets coming into 2022. The sanctions imposed on Russia in response to its invasion of Ukraine have only exacerbated its expected rise, and pushed its expected peak further out.
FOMC: Central bankers face conundrum on inflation and growth
The much-anticipated March FOMC meeting is finally upon us, and given there was no meeting in February investors will be very glad of this window into the Fed’s thinking, particularly given the ongoing and far-reaching economic ramifications of Russia’s invasion of Ukraine.
Investors face conundrum on government bond allocations
We think a base case that central banks will follow a more measured monetary policy path than markets are currently pricing in is reasonable given the current backdrop.
Steady Fed makes short end look attractive
Escalating geopolitical tensions have contributed to a volatile past week for investors, but uncertainty regarding central bank action continues to dominate the bond markets, with one investment bank now predicting nine straight hikes from the Fed beginning at its March meeting.
What are government bonds saying?
Yield curve shape and yield curve change are often good predictors of the state of the economy and its outlook.
Managing the downturn
As 2021 wore on we became increasingly concerned that the disconnect between asset prices, economic fundamentals and monetary policy was becoming more acute.
What will turn this market around?
For fixed income investors, the start to 2022 has been trickier than any we have experienced for many years, but we think this difficulty is to be expected and aligns with our macro view.