Fixed income

As long as coal usage is not illegal, a private buyer of any origin will be able to purchase these assets cheaper and run them for as long as possible with no regard for ESG matters.

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.

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.

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.