Assessing Europe's labelled bond market

Leaders rotate in and out. No single fixed income sector consistently dominates performance over time, and strong performance in one sector rarely carries over from one year to the next. For example, U.S. Treasury bills led in 2018 and 2022 but are one of the weakest performers year-to-date.

Cathy Braganza, senior portfolio manager at Insight Investment, explains why tightening spreads with high yields create a potentially attractive risk-return balance for credit investors.

For advisers, focused on a breadth of client needs, there isn’t enough time in their day to navigate the complex nuances of bond markets. This explains the popularity of strategic bond funds. They can hand decision-making to an expert, with a flexible mandate to roam across bond markets, finding the best opportunities. However, this flexibility means evaluation is difficult, and advisers aren’t always getting the outcomes they expect.

Income-based returns are back, and investors no longer need to risk equity-type drawdowns or sacrifice liquidity to achieve their investment objectives. In our view, it is an opportune time to increase fixed income allocations.