UK

An otherwise fairly uneventful year for the UK banking sector has occasionally been dented by headlines concerning the Financial Conduct Authority’s (FCA) investigation into motor finance commission arrangements.

With fresh uncertainty surrounding the path for interest rate cuts, we believe the high current income and typically lower volatility offered by European asset-backed securities (ABS) and Collateralised Loan Obligations (CLOs) make them an attractive allocation option for this stage of the cycle.

With the first Labour budget since 2010 dominating headlines, hallway conversations and family gatherings in the UK for the past couple of months, the stakes were very high indeed for the chancellor, Rachel Reeves, on Wednesday. Political opinions aside, the budget is usually an important event for market participants and this one was no exception.

With elevated yields and inflation expected to come back to target, we think investors can target a level of real return that was extremely difficult to achieve in the previous cycle.

With cracks starting to show in the US economy, many are wondering whether tight corporate bond spreads leave investors vulnerable. But with corporate balance sheets holding firm and yields on higher quality bonds looking attractive, staying invested in credit should continue to reward investors.

Recent economic news may have created a sense of uncertainty across Europe, but Ellie Aylen from our Asset-Backed Securities (ABS) team offers a more optimistic view. According to low-level data from the Bank of England (BoE) and the European Central Bank (ECB), the actual performance is much more reassuring than what the headlines might suggest.

Pauline Quirin, Portfolio Management, provides an update on the global Collateralised Loan Obligation (CLO) market, highlighting why we think CLOs are positioned to deliver the strongest performance across fixed income markets for the rest of the year.

The start of the school year ordinarily also marks the end of summer for the primary bond markets as issuance restarts, though this year feels rather different.

It feels as though market news hasn’t taken a holiday so far this summer. From the US on Wednesday we got the minutes of the Federal Reserve’s (Fed) July 30-31 policy meeting, and revisions to a whole year of non-farm payrolls (NFP) data from the Bureau of Labour Statistics (BLS).

When the Bank of England (BoE) cut interest rates for the first time in four years earlier this month, we thought the move – made on a knife-edge 5-4 vote – had come a little too early.

Second quarter growth data for the Eurozone on Tuesday reaffirmed the gradual uptick in the region’s trajectory relative to the pace seen across 2023, with quarter-on-quarter (QoQ) growth slightly higher than expectations at 0.3%.

Last week, the Bank of England (BoE) published a speech by its Executive Director for Markets, Victoria Saporta, in which she laid out the central bank’s evolving role as a lender to the UK banking system. More specifically, the speech highlighted how the BoE expects to see UK banks having a greater reliance on its funding facilities going forward.