Research Paper, ESG, SRI, Obligations, Dany da Fonseca, Vincent Compiègne, Patrick Zeenni
Au-delà de l'obligation verte ?
Prêt pour le changement ?
And this Fixed Income jungle has been dramatically impacted over the last decade by unprecedented challenges and U-turns.
Negative Yielding Debt is over
Over a decade ago negative rates started looming, forcing fixed income investors to explore uncharted territories. Quantitative easing, Helicopter Money became the fad driving a never seen period of Easy Money. One of the impact was a massive increase in issuance in the Emerging Markets Debt space, while on the contrary in Developed Markets the High Yield universe experienced a singular shrink in size.
However since 2022 a clear trend reversal was observed with the Central Banks acting as King of the Jungle.
Prolonged rates hikes shaped a definitive U-turn, in favor of more textbook conditions. With financing costs spiking, the trees began to shake, like the default of relatively new issuers - such as Ghana, Sri Lanka, Zambia -, or corporate default rates trending upper their average since 2019.
Back to normal?
Yet the current environment is supportive, as inflation is trending lower and the economic slowdown in the US and Europe is fueling hopes for rates cuts, as ignited by the Fed on the 18th of September 2024 .
Inefficiencies are creeping back in the Fixed Income jungle:
- We feel that all stages in the jungle are more and more vulnerable to potential widening, triggered by a deteriorating economic environment or exogenous geopolitical risks.
- Fundamentals are holding up, but cracks are appearing, as some issuers are experiencing weakening financial indicators.
- With the upcoming elections, volatility on financials markets is very likely to remain high, or even higher.
Maybe you’d like a few hints to thrive in these challenging times?
Stay Alert for Fair Value
As the landscape in the Fixed Income jungle is ever changing, a new approach is needed to provide informed insights and actionable investment decisions.
In an era of data-driven decision-making and complex economic dynamics, Candriam has developed a sophisticated proprietary framework for assessing fair value.
By capturing the nuances of factors such as economic growth, inflation and central bank policy, this framework provides actionable insights into the fair value pricing of sovereign debt and credit spreads.
Discover the Bonds Euro Diversified fund Discover the Sustainable Bond Global fund
Seize Opportunities. Not Risks.
Bond markets are inefficient, providing multiple relative value opportunities as well as downside risks.
For example High Yield Credit markets have shrunk in size by 25% over the last 2 years. Although it provides a strong technical support, it is important to keep a close watch on fundamentals for when the tide goes out: understanding downside risk for each issuer is today more than ever a key factor to select the most appropriate bonds in a High Yield portfolio.
Explore further Candriam award-winning[2] investment approach in the High Yield space:
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See Beyond the Usual
Environmental crisis, Social unrest, Governance flaws: ESG factors matters every day more and more, notably on Corporate Credit markets.
Green bonds are now supplemented by social bonds, sustainable bonds, and sustainability-linked bonds, which provide not only new investment opportunities, but also offer new information and transparency to all investors as issuers report increasingly useful metrics.
More transparency, more complexity, more opportunities to evaluate and control risk, more opportunities for active management, and above all, more need for fundamental analysis:
Go one step further with Candriam sustainable plan for investing in European Investment Grade Credit.
EXPERTISE
Discover our Fixed Income Teams, Strategies and Investment Philosophy
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Outlook 2024, Charudatta Shende, ObligationsFace à une multitude d’opportunités… il faut choisir avec soin
"Les intérêts composés sont la huitième merveille du monde", a dit Albert Einstein. -
Outlook 2023, Actions, Macro, Obligations, Nadège Dufossé, Florence PisaniL’hiver approche…
Les banques centrales des pays développés vont-elles réussir leur pari de ramener l’inflation vers leur cible de 2 % d’ici fin 2024… sans provoquer de récession ? La Chine peut-elle encore éviter d’entrer en déflation ? Après quelques mois d’accalmie, la remontée des prix du pétrole et des prix agricoles ne risque-t-elle pas de compliquer encore la tâche des banques centrales ? -
Obligations, Nicolas ForestECB Hike
C’était en juillet 2011. Jean-Claude Trichet malgré la crise de la dette de la zone euro remontait son taux directeur à 1,50 %. Il fallait combattre l’inflation qui touchait dangereusement la barre des …2,50 %. La suite est connue et a traumatisé plus d’un investisseur obligataire confronté à la crise des dettes périphériques et une déflation en Europe.