Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Consider bonds to diversify against stock market risk
Althea Spinozzi
Head of Fixed Income Strategy
Summary: As real rates continue to soar on both sides of the Atlantic, financial conditions will tighten further, putting more pressure on risky assets. Yet, record-high bond yields might present an opportunity for investors looking to secure a stable cash flow and create a buffer against a stock market downturn. This piece looks at bond opportunities in the short and long part of the yield curve in the US, Europe, and the UK.
Historically, bonds have played a crucial role in diversifying portfolios’ risk and reducing overall volatility.
As we discussed in Saxo’s recent quarterly outlook, central banks might need to keep a hawkish bias as inflation remains elevated despite the economy decelerating sensibly. Therefore, long-term rates might continue to soar while the front part of the yield curve remains anchored.
Within this environment, we favor high-quality short-term bonds. Yet, as we approach a peak in yields, income seekers are presented with the opportunity to lock in decades-high yields.
Below, we want to provide a comprehensive list of short and long-term high-grade for inspiration purposes.
USD "magnificent seven" bonds
USD Government bonds
USD Corporate Bonds
EUR Government bonds
EUR Corporate bonds
GBP government bonds
GBP corporate bonds
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