Navigating Rates

Fixed income cheat sheet: Ways to invest as markets shift

15/03/2023

The world’s bonds markets provide a rich and varied toolkit for investors to help diversify risk in their portfolios and seek additional sources of potential return.

Capturing potential income

Following the substantial fall in bond prices in 2022, yields may be looking more attractive than they have for many years, and some investors are raising their allocations to fixed income again.*
The investment environment is likely to remain complex owing to uncertainty around the pace of inflation, direction of interest rates and a shifting economic growth outlook.

Harnessing versatility

Versatility of fixed income could mean a range of potential opportunities to match each stage in a shifting market environment.
Through a selective approach, fixed income could be used to help diversify risk and seek additional sources of potential returns.

Seizing potential opportunities

To help make sense of these challenging conditions we’ve identified a set of investable ideas outlined on the next page.

Fixed income opportunity set

Market environment Investable Ideas table

This is for information purposes only and not to be construed as a solicitation or an invitation to buy or sell securities. There is no guarantee that these investment ideas will be effective under all market conditions and investors should evaluate their ability to invest for the long-term based on their individual risk profile, especially during periods of downturn in the market. Investing in fixed income instruments may expose investors to various risks, including but not limited to creditworthiness, interest rate, liquidity and restricted flexibility risks. Changes to the economic environment and market conditions may affect these risks, resulting in an adverse effect to the value of the investment. During periods of rising nominal interest rates, the values of fixed income instruments (including short positions with respect to fixed income instruments) are generally expected to decline. Conversely, during periods of declining interest rates, the values are generally expected to rise. Liquidity risk may possibly delay or prevent account withdrawals or redemptions.