16 October 2020
At GAM Investments’ Weekly Fixed Income Meeting held on 13 October, three of our investment specialists discussed their views on current market conditions.
Michael Biggs – Global Macro and EM Debt
Upwards revisions to US GDP forecasts, as well as strong China import data, point to a positive global growth story. Yet while it appears that the global recovery is gaining momentum, we remain somewhat cautious on risky assets. Unfortunately, positive economic data is running into a resurgence of Covid-19 cases, particularly in Europe. This increases the risk of further lockdowns, which would damage global growth prospects.
Jack Flaherty – US Credit
After a blockbuster September which saw record issuance, October has been quieter. Balance sheets continue to look healthier and there remains plenty of appetite for deals. US GDP forecasts are being revised upwards, while US corporate debt default rate estimates are declining considerably. Triple C-rated bonds, which have performed poorly year-to-date, have recently outperformed. In terms of the US election, recent polls suggest Biden is pulling away from Trump, but this does not seem to be rattling markets.
Florian Komac – European Credit
European credit markets have been relatively benign for the past two weeks; investors appear to be looking beyond rising Covid-19 case numbers. Brexit progress remains slow and the window of opportunity for a deal continues to narrow. Reports suggest some firms have started to shift assets out of London on some meaningful level. Meanwhile, the Bank of England (BoE) has reached its target of at least GBP 20 billion of corporate bond purchases. It will tighten lending rules going forward, before closing its Covid Corporate Financing Facility (CCFF) altogether in March 2021, leaving the UK’s corporate debt market to stand on its own two feet. Elsewhere, Bloomberg has reported that a Swedish private equity firm is considering a takeover of Dutch telecoms operator KPN.
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.