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Delta: from the rear-view mirror to the road ahead (part 2)

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, this 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 second instalment of this two-part podcast, Jacko and Andrey Kuznetsov, a Senior Credit Portfolio Manager at Hermes, follow on from their 2018 review to discuss pivotal topics for credit investors in the current environment: from Federal Reserve’s dovish reversion to widespread corporate deleveraging, and the unlikely phenomenon of increasing dispersion in the high-yield market during this year’s rally.

“With the extent of unconventional monetary policy around the world, we are more likely to see mini cycles rather than a big crisis like the one in 2008, and they are likely to happen in periods of low liquidity,” Kuznetsov says. “Lower for longer certainly seems to be the theme…and with so much of the curve trading below zero, you have to work hard for returns.”

Flexibility is important – for accessing diverse sources of capital return and income in a low-yield world, and being able to preserve capital and capture opportunities when volatility spikes.

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.

Featured Insights

360° – Fixed Income Report, Q3 2019