Dear Investors,

Please find below the latest edition of the Fixed Income monthly as of October 2019.

Key Highlights

TAA:

Our main scenario is still that the US will avoid a recession over the next twelve months. Given the current uncertainties, however, we continue to prefer a defensive portfolio positioning towards the end of the year, with limited exposure to riskier segments such as high yield and emerging markets local currency debt.

Sovereigns:

Many think the Fed will always come running to the rescue whenever markets ring the bell. That belief is being challenged, however, as the recent FOMC minutes show members divided over the need for further easing.

Credit:

Weaker fundamentals and current market conditions have not derailed overall (compressed) spreads, which remain supported by investors’ search for yield and central bank policies. BBB and BB segments are considered the sweet spot and the best way to gain exposure to decent carry to close the year.

Emerging debt:

Deterioration of global data does not bode well for EM fundamentals. However, central bank response later this year should be supportive of fixed income assets. EM corporate debt is most likely to benefit from the central bank stimulus. We remain cautious on local debt.

Issuer preferences:

Over the month, in the emerging markets investment grade segment, we added DP World in the Europe/MENA region.

Do not hesitate to contact us for additional information or for feedbacks.

With kind regards,

The Investment Solutions Fixed Income Team