Market Update

An asset-backed finance (ABF) investment backed by a portfolio of Dutch unsecured consumer loans originated by Qander Consumer Finance.

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.

As the third quarter of 2024 comes to a close, TwentyFour Asset Management's Aza Teeuwen reflects on what this has meant for the Asset-Backed Securities (ABS) team. Not only were volumes across European ABS elevated throughout July and August, we also saw €34 billion in primary issuance – a significant increase from previous years.

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.

George Curtis from the Multi-Sector Bond (MSB) team at TwentyFour Asset Management reflects on the third quarter of 2024 and its impact on credit and equity markets. Despite some mid-quarter volatility, overall performance remained strong, with government bonds leading the way.

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.

Our investment grade team discusses our longstanding carbon emissions engagement policy and its focus on collaborating with companies we believe we can influence. Our goal has been to shape their environmental journey over the medium to long term, leading to a reduction in carbon emissions.

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.

In his latest update on the European high yield market, a member of our Multi-Sector Bond team discusses two key topics: the Maturity Wall and Default Rates. He highlights that as interest rates continue to rise, default rates are projected to increase from 2.5% to around 3%.

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.

We have consistently highlighted the benefits of higher interest rates for the European banking sector. However, the current outlook suggests that lower rates are anticipated going forward.

Eoin Walsh delivered the keynote address at TwentyFour Asset Management’s Annual Conference in London on September 10, 2024.