Search this website. You can use fund codes to locate specific funds

Looking below the surface of fixed income markets: 360°, Q2 2021

What is our current view of fixed income markets? And where do we see the best relative value? In our latest edition of 360°, Andrew ‘Jacko’ Jackson, Head of Fixed Income, and our team of specialist investors consider the areas that have the potential to deliver superior risk-adjusted returns.

There remain many challenges ahead for credit markets

On the surface, fixed income markets has been pretty quiet but, below the surface, the currents have been violent.
Although many of us were focussed on the possibility of this, it has caught market participants off guard, particularly those for whom rates have been a permanent source of income: consistent, solid, one way and always positive.

Investment grade corporate credit spreads have barely moved over the quarter either in Europe or in the US. Yet, the asset class has had one of its most negative, and most volatile, quarters ever. The US Investment Grade Corporate Credit index lost 4.5% in the first quarter of 2021, making it the worst quarterly performance since the global financial crisis. High yield markets fared no better with a loss of 0.08% for global high yield. In this publication, we focus almost exclusively on what’s happening in credit land. 

Which way inflation?: issues in focus this quarter

In this issue of 360°, we also take a closer look at:

  • Relative value: the unresponsiveness of spreads
  • Structured credit: Structures have done what they were designed to do
  • Sustainable finance: the link between ESG scores and credit ratings

See below for a flavour of these sections or read the full report for a more comprehensive picture.

Fixed Income Quarterly Report

Q2 2021
 

Archive: previous editions of 360°

As fixed income markets have moved through the economic cycle, our thinking has also developed – take a look at some of our previous reports to see how the investment landscape has changed over the past year.

More Insights

Federated Hermes Stewardship Report 2021
At Federated Hermes we believe the investment industry can be a powerful force for good, building a fairer, more equitable world for all – and that active ownership and engagement is the best way to achieve this. In this, our second annual Stewardship Report, we provide an update on our efforts towards effective and outcomes-driven stewardship.
The chimps are coming
The public art exhibition Chimps are Family, unveiling on Endangered Species Day (Friday the 20th of May) at Tower Bridge, sets to create awareness around the plight of the endangered apes.
Climate Change High Yield Credit strategy, interim report 2021
In this inaugural report, we delve into what makes the Federated Hermes Climate Change High Yield Credit strategy unique. As well as introducing our process and team, the report provides an overview of our proprietary Climate Change Impact (CCI) score, complete with portfolio examples to illustrate the scoring system in practice.
Market snapshot: Slowdown fears send equities spinning
Stagflation concerns continue to mount, with investors piling into cash positions as the global growth outlook plunges.
Plus and minus: can QT annihilate QE (and other anti-inflation questions for financial markets)
Fiorino queries whether investors should expect an equal-and-opposite reaction as central banks release the anti-QE solution into the real world...
The soil carbon sponge: A sequestration trump card
In a briefing to investors, Walter Jehne, co-founder of NGO Regenerate Earth, argued that a focus on cutting emissions misses the point when it comes to understanding what a healthy biosphere could do to sequester carbon.