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Four fixed income themes to watch
Many of the major central banks (excluding Japan) are beginning or set to begin interest rate-cutting cycles this year. Here are four fixed income themes we believe could present investors with opportunities during the remainder of 2024.
Key takeaways
- In anticipation of future rate cuts, we favour steepeners in the US and Germany, while monetary policy normalisation in Japan over the coming years favours a flattening yield curve expression.
- Following a high degree of correlation in the performance of developed bond markets, diverging economic outlooks will likely open up relative value opportunities across sovereign bond markets.
- Caution is warranted in corporate bonds – especially high yield – given rich valuations.
- As economic performance and monetary policy diverge, and the US dollar starts to face headwinds, active currency management is set to play an increased role in fixed income portfolios.
Allianz Global Investors
Thursday 13th June 2024
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