Fixed Income

Global Fixed Income Strategy Monthly Report

November 6, 2024
Invesco
2022 in review paul jackson

Get an analysis of important drivers of global fixed income markets, including macroeconomic trends, interest rates, currencies, and credit, in our monthly global strategy report.

In our October monthly report:

  • Global macro strategy
    As the European Central Bank (ECB) begins its rate-cutting cycle, market observers have debated the level of the so-called “neutral” rate of interest. Is it higher than it was pre-pandemic?

  • Interest rate outlook
    In the US, we favor a neutral position in Treasuries and will look for a favorable valuation and technical environment to add to Treasury risk.

    In Europe, we’re positive on rates and believe the European Central Bank (ECB) will be forced to ease sharply next year, as it becomes apparent that inflation is heading below target and the economy is struggling to escape a recession.

  • Currency outlook
    We’re broadly neutral on the US dollar. The economy’s performance remains impressive, despite high interest rates and a slowing labor market. The election, however, will likely be pivotal to its future direction.

    We’re underweight the euro and believe it faces a number of headwinds, including, weak growth, political turmoil, and a central bank behind the curve.

  • Global credit strategy
    Asset-backed securities (ABS) can offer incremental income and credit diversification that contribute positively to portfolio risk and return objectives.

  • Q&A: Path to better fiscal health in emerging markets?
    Changing political trends in some emerging markets are resulting in the success of anti-corruption candidates. Greater trust in government could lead to higher tax collection and better fiscal health for countries.
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Catch up on the last few editions:

FAQs

Whether you’re looking for income, diversification, capital preservation or total returns, our global fixed income teams have the strategies, the scale and the flexibility needed to match your objectives as markets evolve.

We have more than 200 fixed income specialists who invest across regions, investment styles and capital structures. Their expertise spans the entire fixed income spectrum, covering credit, rates and currencies.

  • $460 billion in fixed income assets under management
  • 18 years investing in fixed income markets

Source: Invesco as of September 30, 2024.

Fixed income investments can offer several important benefits to investors:

  • Diversification: Adding fixed income securities to a portfolio can help diversify it and reduce its overall risk, as bonds typically behave differently to other investment instruments like equities.
  • Risk reduction: Fixed income investments are deemed less risky than stocks, as the issuer is contractually obliged to meet the income payments and repay the principal sum on the redemption date. In the event of bankruptcy, fixed income instruments also sit higher up the capital structure than equities. This means that the issuer will meet its debt obligations before looking after its shareholders.    
  • Liquidity: Many fixed income securities are highly liquid and can be easily bought and sold in the market.

While fixed income securities are deemed less risky than equities, there are still some key things to look out for:

  • Interest rate risk: When interest rates go up, bond prices go down. This is because, in the new higher rate environment, new bonds will be issued on more attractive terms. As such, investors looking to sell their existing bonds will need to do so at a discount in order to compete.
  • Inflation risk: When investors buy a bond, they commit to tying their money up for a set period of time. If inflation is high or rises during the lifetime of the loan, its value will be eroded and their money will have less purchasing power when it is repaid on the redemption date. Inflation also erodes the purchasing power of the income earned.
  • Credit risk: When you invest in a business or government, there is always a risk that they will go bankrupt and fail to repay the loan. Furthermore, if they run into difficulties, they may struggle to meet interest payments and default on their obligations. Fixed income investors should carry out thorough credit analysis before buying a bond to make sure the issuer is financially sound.
  • Market risk: If an investor is unable to hold a bond until maturity and needs to sell it on the secondary market, price fluctuations resulting from the overall performance of financial markets could lead to losses.

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Important information

  • This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.

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