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Delta: from the rear-view mirror to the road ahead (part 1)

Rallying credit markets have followed the intense volatility of late 2018, speculative high-yield bonds have fallen out of favour and the lower-for-longer mantra of central banks has resumed. Much has changed in the last 20 months: what are the key risks and opportunities now?

Part retrospective, part forward-looking, the fifth episode of Delta interrogates the differences between market expectations of 2018 and what actually transpired, and examines the dynamics that fixed-income investors are facing in 2019.

In the first instalment of this two-part podcast, Jacko is joined by Andrey Kuznetsov, a Senior Credit Portfolio Manager at Hermes, to discuss the pivotal topics for credit investors in 2018: from the outperformance of lower rated high-yield instruments and fear that investment-grade bonds would become fallen angels, to the widespread panic that closed out the year. 

"There was a significant amount of compression at the start of the year, with CCC-rated instruments outperforming. This had changed by Q4, as in many cases there was decompression between the senior and subodinated parts of the capital structure," Kuznetsov says. "So security selection remained key." 

What were the defining themes of 2018, and why was flexibility important in adapting to changes in the investment environment?

Tune in to Delta.

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In each episode of Delta, Jacko and his guests answer a front-of-mind question from listeners in a regular feature, ‘All options on the table’. Enter yours below.

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