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Weekly Manager Views: Fixed income

02 October 2020

At GAM Investments’ Weekly Fixed Income Meeting held on 29 September, three of our investment specialists discussed their views on current market conditions.

Christof Stegmann – European Credit

European corporate credit spreads widened last week, with the insurance sector the main outlier in the investment grade (IG) space and leisure and transport weaker in the high yield (HY) segment. Medical technology group Medtronic issued a total of EUR 6.2 billion worth of debt with different maturities, a sizeable deal by European standards.

For most of the eurozone, September flash manufacturing purchasing managers’ indices (PMIs) increased, but services PMIs fell, likely as a result of new Covid-19 restrictions impairing the economy. In the UK, both metrics declined. Bond buying by the European Central Bank (ECB) under the Emergency Purchase Programme (PEPP) and other quantitative easing programmes remains a supportive technical for European credit and discussions on the future pace of purchases are ongoing.

Paul McNamara – Emerging Market Currencies

After a period of weakness, sudden US dollar strength has put pressure on emerging market (EM) currencies. Three markets look particularly challenged at present. In Turkey, the lira continues to slide on the back of surprising and costly levels of intervention by the central bank. In Brazil, despite decent fundamentals, the real has weakened due to fiscal spending concerns. The Russian rouble has also tumbled. Overall, we believe a growth catalyst would provide direction for EMs. If global growth picks up, local EM performance could improve.

Jack Flaherty – US Credit

Last week HY bond funds suffered their largest outflows since March, losing USD 5.4 billion. Spreads widened but have since snapped back. Ultimately, we believe volatility will be here for a while, resulting in caution from investors. On the political front, although the US presidential debates may provide great entertainment value to some observers, Trump-Biden clashes are not significant events from a market perspective. Claims over voter fraud perhaps warrant more attention as uncertainty surrounding election results would be unwelcome.


Important legal information
Source: GAM unless otherwise stated. The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator for the current or future development. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. Reference to a security is not a recommendation to buy or sell that security. The companies listed were selected from the universe of companies covered by the portfolio managers to assist the reader in better understanding the themes presented. The companies included are not necessarily held by any portfolio or represent any recommendations by the portfolio managers. October 2020.