Insights

There has been a lot of focus on the performance of the high yield markets since the start of the year, particularly in Q1 when many rates markets were selling off aggressively.

Crucially while the Fed may wait to see the evidence, markets won’t, and we therefore expect a ‘second wave’ of Treasury selling to happen well before then.

Having been at the heart of the GFC and then contributing to the Eurozone sovereign crisis, we have long argued the European banking sector would have to prove its newfound resilience to investors by successfully navigating a challenging period.

Senior Portfolio Managers Christian Hantel and Marc Van Heems take you on a quick global tour of some enticing travel destinations that also offer opportunities to global bond investors.

Tobacco company bond spreads were volatile last week on news that the Biden administration is exploring a ban on menthol cigarettes and may pursue a policy to reduce nicotine levels in all cigarettes to non-addictive or minimally addictive levels. Rumours about an increased tobacco tax also surfaced, further shaking up the industry.

US corporates are in the recovery stage of the credit cycle and their main task is to work on repairing balance sheets and credit metrics, such as leverage, cash flow and margins. New virus mutations, sudden inflation flare-ups or changes in central bank policy could disrupt this process, which is however unlikely.

What is most interesting about the CS situation though is that to us it illustrates the ability of large banks to bolster capital when such events occur, and the range of options they have to do it.

Had this happened a month ago, we suspect the move would be materially more pronounced, and the muted reaction indicates to us that markets are now quite comfortable with the current levels of expected growth, forecast inflation, and yields.

TwentyFour Asset Management CEO, Mark Holman, explains why he believes investors should still be starting their search for income in bonds, and how they can look to combat further rates weakness by looking globally and targeting the right areas in credit.