COVID-19

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.

So far, lockdown restrictions have suppressed each wave of the virus; will the competent authorities have the conviction to see this latest wave through without erring on the side of caution once again?

TwentyFour's CEO, Mark Holman, discusses market conditions in Q2 2021 and provides his outlook for the year ahead.

TwentyFour Partner and Portfolio Manager, Douglas Charleston, explains how ABS markets have performed in Q2 2021 and provides his outlook for the year ahead.

TwentyFour Partner and Portfolio Manager, Gordon Shannon, discusses how Investment Grade markets have performed in Q2 2021 and provides his outlook for the upcoming months.

Doing the necessary work to understand the difference between companies merely exposed to COVID restrictions and those structurally damaged by them continues to be extremely important.

Regular readers will know that we have a positive medium term view of spread products. This is based on a number of factors; valuations in our view are reasonably attractive compared to history, we are convinced that both monetary and fiscal stimulus will remain in place for an extended period of time, and perhaps most importantly we remain at a very early stage of the new cycle.

Corporate hybrids have evolved in recent years into a large and well-established asset class within the European fixed income market, with €185bn of bonds outstanding.

One of the legacies of Europe’s post-crisis lending landscape was a huge retrenchment in risk appetite, amplified by a lack of bank capital and in some instances funding for an extended period of time.

Earlier this week, Moody’s published its default study for June, which showed that as expected, default rates globally have started to pick up as a result of COVID-19. The trailing 12-month global high yield default rate reached 5.4% at the end of June, up from 4.8% in May, as the gap to the long term average of 4.1% continues to grow.

Like many market participants we are looking ahead to a much anticipated Q2 reporting season, which is even more pertinent this year given the unprecedented environment we have all found ourselves in. We are particularly interested in reviewing the major banks given they are at the centre of the transmission mechanism and hence a barometer for the wider economy.

From an active manager’s point of view, risk premiums are currently very high in emerging markets and make their corporate bonds an attractive asset class in the stubborn low-rate environment. Wouter van Overfelt, portfolio manager of our Emerging Markets Corporate Bond portfolio, is ready to take advantage of the broad and promising opportunity set, applying a tried and tested investment strategy.