Market updates

Speculation on the timing of the Bank of England’s first post-pandemic rate hike has been rife. But whether the BoE hikes rates later this week, next month or even waits until after year-end, it is worth thinking about what it will mean for the general public, a step away from the financial markets.

Following a turbulent week for rates markets, Eoin Walsh outlines what investors can expect as the Bank of England and other central banks meet this week.

With a student housing CMBS deal recently brought to market, Kevin Law evaluates the sector’s outlook in the aftermath of COVID-19

With all eyes on November 3 and the Fed’s next move, Paul Kim looks at supply chain disruption in the US and how its cost pressures have shifted the narrative on ‘transitory’ inflation.

TwentyFour Partner and Portfolio Manager, Douglas Charleston, explains how ABS markets have performed in Q3 2021 and provides his outlook for the rest of the year.

TwentyFour Portfolio Manager, Diana Chiu, discusses how the short term bond strategy has performed in Q3 2021 and provides her outlook for the rest of the year.

A member of the Multi-Sector Bond team discusses market conditions in Q3 2021 and provides her outlook for the rest of the year.

After a mixed start to Q4 for risk assets, Elena Rinaldi examines how European ABS and CLO assets have fared so far in Q4 and the factors currently affecting both markets.

Let’s not forget that the BoE dropped rates from 0.75% right down to 0.1% at the start of the COVID-19 pandemic back in March 2020, having only managed to put through two hikes in 2017 and 2018. It has changed course sharply before.

Fixed income markets have experienced a reasonable correction over recent weeks and, for higher-yielding indices at least, their first negative period so far this year.

Given the prospect of central bank tapering and ultimately interest rate rises are looming ever larger, it is no surprise dealmakers are trying to take advantage of attractive financing terms while they still exist.

While bank treasurers may have to work a bit harder this year-end to formulate wholesale funding plans, the ABS market that they may be more reliant on going forward is experiencing a strong resurgence, which should ease the process of weaning off central bank funding.

This looks to us like a buy-into-the-dip opportunity, but investors should be wary of taking on too much rate sensitivity as the move in risk-free curves is likely to persist until the rate hike cycle is actually on the way.

In the last month, global government bond curves have had a torrid time, with significant steepening seen across US Treasury, UK Gilt and German Bund yields.

From time to time, Treasury yields actually become the source of risk for financial markets.

On Wednesday, the Fed moved one step closer to tapering and even put quite a clear timeframe for it, while on Thursday, the Bank of England openly talked about rate hikes.

It will take time for this sector to recover and we are likely to see more suppliers collapse in the coming weeks and months.

Our base case is for a continuation of quite high growth and a modest inflation overshoot. For bond investors, positioning for stagflation could be a dangerous trade if that base case bears out

With ample job openings, inflation well ahead of target, financial conditions that are certainly not tight and strong economic growth, the obvious question is what does the Fed need to see to finally start tapering its asset purchases?

BWIC – or bids wanted in competition – lists, are a unique characteristic of the ABS and CLO markets, where they are widely used in secondary trading when investors are looking to sell bonds.

As we rapidly descend upon the fourth quarter of this extraordinary year, we think some of the risks fixed income investors faced back in Q1 will rear their heads again before the end of 2021.

Despite the impressive returns of Euro HY over the last year or so, the backdrop for the asset class continues to suggest there is more upside to come.

This supply surge can be very welcome for those investors with cash to put to work, though it is also eyed with caution.

As the Delta variant establishes a hold in many countries, forcing some governments to re-assess reopening policies, the market is beginning to feel its impact. The implication on growth remains unclear, but early indications suggest the growth rate may have peaked for this year, albeit continuing its recovery.