Focus Fixed Income - January 2020
2019 was marked by a reversal of monetary policy on the part of the main central banks, with rate cuts and the return of bond buying programmes. 2020 should be the year of the rate pause for the Fed and the ECB.
IN A WORD:
2019 was marked by a reversal of monetary policy on the part of the main central banks, with rate cuts and the return of bond buying programmes. 2020 should be the year of the rate pause for the Fed and the ECB.
Bond yields are expected to tighten slightly in the US by the end of the year, and remain relatively stable from current levels in Germany. We forecast 2% and -0.25% respectively for 10 year yields. Debt supply dynamics and the ECB's bond buying programme are downward pressure on eurozone yields.
We maintain our preference for short dated US sovereign bonds, euro and US dollar Investment Grade credit, eurozone convertibles, emerging market sovereign bonds in local currency and emerging market corporate bonds denominated in hard currency.