Investment Grade Quarterly Update – October 2024

TwentyFour
Market Update
Watch 3 min

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.


 

Key takeaways

Investment Grade market performance

  • While rate cuts certainly look to be here to stay, core inflation remains stubbornly high
  • The outlook for government bonds is particularly positive, better than it has been in many years - especially for short-dated bonds, where we think the curve will continue to rally as rate cuts take effect
  • On the flipside, credit spreads, especially in non-financial bonds, appear tight compared to historic averages. However, we think financial spreads still offer significant value, supported by strong fundamentals

Market outlook

  • We are now in a position where interest rates are a source of potential capital gains
  • Credit, which has been a strong source of gains over the past two years, may now become a potential source of weakness 
  • We aim to remain defensively positioned within our credit allocation and to keep credit spread duration near the lower end of historical averages

 

 

 

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