“There’s going to be divergence within credit, and within geographic regions,” said Paul Brain, head of fixed income at Newton Investment Management.
And the prospect of higher interest rates will push up borrowing costs, albeit from historic lows. But the vast stimulus unleashed to support economies following periodic lockdowns has fueled rampant inflation. It’s a shift from the past two years, where virtually all corners of credit rallied after central banks and governments stepped in to provide unprecedented support during the pandemic. But it’s also because specific risk is going to grow, so you’ll be more rewarded if you spend more time on name selection.”
“There’s less overall value in the market as a whole. “Investors will need to do more stock picking,” said Gregoire Pesques, head of global credit at Amundi, Europe’s largest asset manager. And that’s in addition to stretched valuations, the prospect of fewer central bank asset purchases and a new coronavirus strain the market knows little about. (Bloomberg) - Credit investors are going to be picky about what they buy in Europe’s expensive debt markets next year.Īmundi SA, Newton Investment Management Ltd and Western Asset Management are drilling down into company balance sheets, looking at how they make their money, gauging profit margins and weighing how well they can cope with rising interest rates and slowing global growth.