The cale year 2021 is expected to be highly volatile for fixed income markets and investors will have to position their investments to withstand volatility. Covid-19 pandemic that drove monetary and fiscal policies in 2020 will continue to play a large part in shaping fixed income markets in 2021.
Vaccines, while providing relief in terms of health, will not provide an antidote to the economies hit by Covid-19 and this will further the presence of central banks and governments in the bond markets.
Bond yields are at all-time lows and in the developed world, above USD 16 trillion of bonds are trading in negative territory while extreme short end US treasuries are hovering at close to 0%. Credit spreads across the globe have fallen sharply on Fed and other central bank support to credit markets. Investors are desperate for higher-yielding assets and that is driving flows into emerging market and riskier bonds.
Desperation makes investors forget risk and higher risk-taking in fixed income
Synopsis
Calendar year 2021 is expected to be highly volatile for fixed income markets and investors will have to position their investments to withstand volatility. Covid-19 pandemic that drove monetary and fiscal policies in 2020 will continue to play a large part in shaping fixed income markets in 2021.
Vaccines, while providing relief in terms of health, will not provide an antidote to the economies hit by Covid-19 and this will further the presence of central banks and governments in the bond markets.
Bond yields are at all time lows and in the developed world, above USD 16 trillion of bonds are trading in negative territory while extreme short end US treasuries are hovering at close to 0%. Credit spreads across the globe have fallen sharply on Fed and other central bank support to credit markets. Investors are desperate for higher yielding assets and that is driving flows into emerging market and riskier bonds.
Desperation makes investors forget risk and higher risk taking in fixed income investments can backfire earlier than later.
The strategy to adopt in 2021 for fixed income investments is highlighted in this INRBonds India Fixed Income Strategy Report.
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