Strategic Income Quarterly Update – April 2021

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.

On Thursday, markets received preliminary Purchasing Managers’ Index (PMI) figures for August. As a reminder, PMIs are timely indicators of trends in manufacturing and services, with a number above 50 signalling an expansion and below 50 a contraction.