Q2 2024 Active Fixed Income Outlook: new rates regime?

Against a backdrop of solid growth and declining inflation, for much of the year so far investors have anticipated a series of US interest rate cuts, thus conforming to the perfect soft-landing narrative. It now looks as though that narrative is being challenged. Geopolitical tensions, coupled with a US economy that is running too hot for comfort, means that the possibility of a ‘no cuts’ base case on yield curves and issuance may well become a reality. What are the implications for fixed income investors?

In this second quarter outlook, our Active Fixed Income team also discusses:

• What’s behind the recent strong inflows into European credit and what could reverse that trend?
• Why, do we believe, worries over upcoming high-yield maturity walls are unfounded?
• And what’s behind our reasoning that emerging market high yield valuations appear cheap relative to historic levels?