Government Bonds

CEO and Portfolio Manager Mark Holman discusses Q4 performance for the Strategic Income strategy and provides his outlook for 2020.

September new issuance has opened with a bang as we expected. Volumes are high and the issuer types are diverse, with a slant towards more frequent borrowers who tend to have their ducks permanently lined up in order to jump on favourable conditions. We expect this trend to continue throughout September as bankers push borrowers to take advantage of what could be one of the best opportunities they might see this cycle.

The average yield of the bond market today is 1.46%, while its average duration is 7.05 years, going by the widely used proxy of the Barclays Multiverse Index.

Today marked the arrival of a long expected event, namely the inversion of the US yield curve between two and 10 years. This is an important event as historically it has been a very reliable indicator of impending recession. History tells us that once the 2s-10s curve inverts, on average a recession is a year to 18 months away.

Since the two anti-establishment parties (The League and Five-Star) formed a coalition and took control in Italy, markets have been uncertain on the domestic government policy that was promising many things to many people and ultimately creating considerable friction with the European Commission (EC).

TwentyFour CEO Mark Holman explains how high conviction thinking runs right through the firm’s investment process, and why he believes a concentrated, flexible portfolio is critical to combatting the unique challenges facing fixed income markets today.

“This time next year, Rodney…”

It is that time of year when we traditionally look ahead to the new year and make predictions on the performance of various asset classes, sectors and industries.

We have been discussing for a while what the quantifiable impacts of Italy’s populist government have been for the country’s economy.

We hear from the portfolio managers about how their fixed income specialism gives them a unique insight into global bond markets.

A quick look at the dashboard of 16 fixed income indices I track clearly shows the amount of pain experienced by investors so far this year. Of the 16 indices I follow, which include IG corporates, government bonds and high yield all denominated in sterling, euros and dollars, Bank CoCos, £ and € Sub Insurance, three hard currency corporate EM indices and the G7 govvie index, only two had a positive total return for the year at the end of October.

After some very negative research pieces – some almost sensationally so – on the affect the wider Italian Government Bond (BTP) spreads would have on Italian banks, yesterday we got to see the facts from Intesa Sanpaolo when it  reported its  Q3 earnings.