Short Term Bond Quarterly Update – October 2022
TwentyFour
TwentyFour Portfolio Manager, Johnathan Owen, explains how investment grade markets have performed in Q3 2022.
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T-Bill and Chill: Running out of steam?
Earlier this month, we wrote about the high cost of staying in cash in the Euro market. In that note, we argued that a combination of inflation, low front-end rates and steeper curves, favoured a rotation out of cash and cash like instruments into other alternatives that delivered better real returns, including credit. Building on this argument, we wanted to extend this perspective to the US dollar market and highlight a few key points.
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Maybe the stars align for an earlier cut from the Bank of England?
The labour market in the UK continues to cool off along the lines of what the Bank of England (BoE) expects. Yesterday, the Office for National Statistics (ONS), released its monthly labour market data report, highlighting a rise in the unemployment rate and a reduction in some wage inflation measures.
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CLOs prove resilient amid First Brands loan rout
The sharp sell-off in loans tied to First Brands Group, a US auto-parts supplier, has rippled through credit markets in recent weeks — but for investors' outstanding senior secured loans held in Collateralised Loan Obligations (CLOs), the damage appears modest and distinct from reported off balance sheet financings.
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French politics: déjà vu
France is in the news again. Prime Minister Lecornu became the latest casualty of the French politics saga that began just over a year ago when president Macron called a surprise early election.
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Despite tight spreads, European HY is not overheating
Tight spreads and elevated supply are often key signs that fixed income markets are overheating. Despite these all being present within the European High Yield market today, the underlying data points to a more measured backdrop characterised by the printing of high-quality new issues, improving credit fundamentals and a stubbornly supportive technical background, offering investors reassurance over the medium-term future of the asset class.
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The pain is getting real for those long cash
In November 2023, we estimated that holding cash, as opposed to staying invested, could cost investors 10-30% over a three-year period. At the time, we highlighted that interest rates had reached their cyclical peaks and were likely to decrease from that point.
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