Market updates

The ECB published the result of its Supervisory Review and Evaluation Process (SREP) yesterday, which increased the average capital requirements for European banks, and overall, increased the average SREP requirement by approx. 100bps.

Several times this year we have discussed the benefits of “roll down” in an environment that for fixed income investing is particularly unfriendly. We believe roll down gains will be one of the best ways to protect portfolios in 2018 from the rising rate curves that we have been experiencing so far.

After what has been a terrific year for risk in 2017, making our predictions for the upcoming year is all the more challenging. The risks we won’t be taking seem to be much easier to list than those that we will, so we’ll start with those. But before we embark on 2018, we should review our predictions for 2017.