Fixed income outlook update: the market comes out swinging

The year started with some sharp moves in fixed income, with developments in terms of inflation trends and labour market conditions. So, how does this align with a broader fixed income outlook for the year? Fixed income returns could prove to be more dependent on starting valuations than a specific macroeconomic outcome. For example, fixed income yields are generous today because the risk-free rate has risen, not because credit spreads are wide. Higher risk-free rates – and real yields specifically – suggest that investors are being more appropriately compensated for the risks of stronger growth,...