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Fixed income investors are well versed in the risks of ‘fallen angels’, investment grade companies whose bonds tumble in value once they are downgraded to high yield.

The regulations governing market activity have been constantly evolving, but the ESMA directive implementing the Central Securities Depositories Regulation (CSDR) will potentially have quite an impact on traded credit.

The Bank of England (BoE) on Monday published its latest financial stability report and the results of its 2019 bank stress tests, and declared that the UK financial system is well prepared for even a worst-case Brexit and consequent trade war.

"One group of issuers that appears vulnerable to us as we move into a new decade is those facing increased investor scrutiny due to Environmental, Social and Governance (ESG) factors. The case of CoreCivic, a listed REIT in the US, is a good example"

Overnight markets have had significant news to digest, with two of the major geopolitical hurdles that had been worrying investors being removed.

"Where defaults get to exactly depends on a few things, but we can certainly analyse where we think the problem areas could be, whether cracks are already starting to appear, and what investors might do to protect themselves."