KEY TAKEAWAYS
- Global corporate yields are attractive
- Corporate fundamentals are sound
- Yield curve normalisation will favour longer maturities
- Active managers are in the best position to capture attractive opportunities globally
After almost two years of aggressive rate hikes, all eyes are on Central Banks; the bet at stake is the timing of their monetary policy cycles, with the ECB leading the way (25 bps cut on June 6th) and the Fed expected to start lowering interest rates by the end of the year.
In our view, this easing scenario will progressively lead to a yield curve normalisation, driving investors to reassess their fixed income allocation towards longer duration products; indeed, short-term yields will decline, with longer duration solutions being once again more remunerative.
Nevertheless, as shown in the chart on the left, there is no need to measure central banks’ future actions per second, as current yield levels are already attractive. Reaching a peak since the global financial crisis, global corporate universe yields are now close to 5% (in EUR).
This attractive level of yields could act as a cushion versus potential risk-off movements, or even help to offset declines in the unlikely case that central banks would opt for a further rates increase.
The golden moment for credit is also evident from corporate data: despite an uncertain economic backdrop, with 2023 characterised by extraordinary events in the US and Europe [including the regional banking crisis, Credit Suisse’s acquisition by UBS, and a US sovereign rating downgrade], we can observe that companies are holding strong; this as they have been able lock in lower yields in the last decade, characterised by accommodative monetary policies. In our view, it will take time for issuers to be impacted by rising debt costs.
At a geographic level, we see European credit markets as the most appealing, especially if compared to the expensive levels reached by US credit.
As regions have all outperformed or underperformed one another at different times depending on the various factors at that time, this represent a strong argument for active managers, who have the flexibility to search for attractive opportunities across the entire global corporate space.
Learn more about Amundi’s global fixed income offering
Amundi Funds Global Corporate Bond
Amundi Funds Global Aggregate Bond
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 5 July 2024. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.
Date of first use: 5 July 2024
Doc ID: 3570181
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