FICC (Fixed Income, Credit, Currency) Forum 2018

FICC (Fixed Income, Credit, Currency) Forum 2018

With yields at record lows in recent years, sovereign bonds seem to have been considered the ugly ducklings of the fixed income market. At the same time, corporate debt issuance, especially high-yield debt, has exploded since 2009. Some of which has found their way into exchange traded fund vehicles, creating the illusion of daily liquidity.

But as central banks are gearing up for several rate rises, will corporate debt lose its lustre? Central banks, with the US Federal Reserve leading the way, are trying to move away from the debt-fuelled growth and this will see financing costs rise. In this environment, corporates might find it harder to service and refinance their debt.

Are we seeing Hyman Minsky’s financial instability hypothesis playing out in real life, where increased economic prosperity has encouraged borrowers and lenders to be progressively reckless? If so what does this mean for fixed income allocations? Are they still the defensive asset class we remember them to be?

Or are these concerns overblown and will we just enter a period of increased volatility but flat growth, where investment opportunities will be more idiosyncratic? These and other topics will be discussed at the third [i3] Fixed Income, Credit & Currency Forum.