TwentyFour

Chris Bowie at TwentyFour Asset Management describes the third quarter of 2024 as a significant turning point in fixed income markets, marked by the Federal Reserve (Fed) cutting interest rates by 50 basis points (bps) for the first time in many years. This followed an earlier 25bp cut by the Bank of England (BoE), setting the scene for further rate cuts over the coming years.

Friday’s blockbuster jobs report saw a sharp sell-off in the government bond markets, with 10-year US Treasuries selling off by close to 15 basis points (bps), while the 2-year US Treasuries posted a 30 bps move in the same direction, dragging gilts and German bunds with them.

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.

Data out of Europe over the past few weeks has pointed to both lower growth and lower inflation, and rate expectations have shifted accordingly with market pricing now implying a 96% chance of another 25bp cut from the European Central Bank (ECB) on October 17, up from around 25% on September 20.

Douglas Charleston (Partner, Co-Head of ABS) and Pauline Quirin (Portfolio Management), from our Asset-Backed securities team provided a comprehensive understanding of the key aspects and trends within the Significant Risk Transfer (SRT) market.

The building trend of consolidation in the European banking sector is important for several reasons, and could create further opportunities for bondholders.

The quantity of cash parked in money market funds has been at the forefront of investors’ minds for some time now. The surge of inflows for these short term risk-free instruments as rates rose was no surprise considering they now yield more than a single-B rated high yield corporate was offering just a few years ago.

Ten years ago this month, Mario Draghi gave a speech to the European Central Bank’s (ECB) Eurofi Financial Forum making the case for reforming securitisation regulation in order to revive the asset-backed securities (ABS) market in the wake of the global financial crisis.

Uncertainty is over, it was a 50 basis points (bps) move. As we mentioned in our previous blog, the most important take away from the Federal Open Market Committee (FOMC) meeting would be their assessment of the economy.

While the majority of headlines have concerned whether the Fed will do 25bp or 50bp to kick off its cutting cycle, we think this is only one part of the discussion – and not necessarily the most important one.

Yesterday the European Central Bank (ECB) delivered a 25 basis point (bp) cut, their second in the current easing cycle and in line with market consensus.

With the Federal Reserve (Fed) set to begin its long-awaited interest rate easing cycle at next week’s Federal Open Market Committee (FOMC) meeting, Wednesday’s Consumer Price Index (CPI) inflation report for August was the last big economic release investors could comb for clues as to the size of the first cut.