More upside in bank capital

As active managers we are naturally looking for bonds that we believe are mispriced, therefore offering attractive risk-adjusted carry or, sometimes, a capital gain if market pricing falls into line with our view. Equally important is to avoid sectors facing structural or protracted cyclical downturns where we don’t think valuations reflect the fundamentals.

Job creation, or rather a lack of it, has been in the spotlight recently as weak non-farm payrolls data in the US has driven a rally in government bonds and strengthened market projections for rate cuts.

The next few days could be pivotal to any concerns around the independence of the US Federal Reserve (Fed).

The European Central Bank (ECB) is reportedly accelerating its work on a digital version of the euro (the dEuro), having seen the US pass the Genius Act in July which paved the way for broader adoption of so-called stablecoins.

The $5.2tr asset-backed finance (ABF) market represents a growing opportunity to gain exposure to high quality loan pools and the returns they can generate.

We have long harked on about the strength of the technical in credit, with solid fundamentals, resilient inflows and defensive positioning continuing to provide a tailwind for the market.