Speaker 0:
So I've been managing fixed income portfolios for a little over two decades now, and 2023 is shaping up to be one of the better opportunities I've seen in the fixed income space for a long, long time. You have to go back to pre 2008 the GFC to see the kind of yields that we're seeing today. So the starting yield is a very important characteristic for any fixed income portfolio, and it's

Speaker 0:
it's a very good estimate of your four potential returns. So everybody knows where Treasuries are today. They are a lot higher. We can build yield on top of that through the portfolios that we manage. So we're seeing depending on the type of portfolio you're looking for north of 5% on a portfolio that is average investment grade quality at a broad level. When we look at the fixed income markets, we're seeing value in yields themselves. So when I look at the treasury market

Speaker 0:
with the Fed nearly done, its interest rate hiking cycle and inflation peaking and rolling over here, that's a good set up to move out the curve. So we actually are extending out our duration and bringing it closer to some of the traditional benchmarks that are out there. So that's number one and number two. When we look at the spread sectors, there's a lot of great opportunities there from a top down perspective,

Speaker 0:
mainly in the North American market, where we see actually very good fundamentals. Even given the prospects of a mild downturn coming, you're getting a nice premium to invest in things like triple B, double B, investment grade, corporate, high yield corporate as well as in the securitized space. So we have some access there.

Speaker 0:
And then, lastly, we're seeing potentially seeing some opportunities opening up outside of the United States and tilting potentially into the emerging market space and the foreign global space in the developed market area outside the United States.

Speaker 1:
A lot of people were saying that 2023 could be the year of the bond market,

Speaker 1:
but in my opinion, this assertion this, uh, assumption needs some clarifications

Speaker 1:
when we look at the volatility of the bond market and the expected volatility of the bond market for this year, specifically at the beginning of this year, uh, the volatility is expected to stay very high simply because we have central banks that they will continue to tighten their monetary policy.

Speaker 1:
Why are they constrained to high the rates in that situation? When we look at the mixed growth and inflation, this makes both sides of the Atlantic in Europe and in the United States is very strong. I mean, inflation is here to stay the core inflation, when we exclude the volatile components will decline quite slightly and will stay above the target of the central banks.

Speaker 1:
When we look at the growth, for example, growth is much more resilient than expected in Europe and in the US, and this resilience is explained by the strength of the labour market. So when we combine all these elements, the central banks, they are constrained to continue to hide their rates. So we do expect the ECB to reach its key rate to 4% for the first half of this year.

Speaker 1:
So in that context we have to wait the second part of the year to see opportunities on the bond market and specifically on the sovereign bond market. We have to wait some clarifications coming from central banks

Speaker 1:
fed and ECB and clarifications regarding the moment where they stop hiking the rates at that moment. Clearly, the long term interest rate would start to decline in line with the decline of the growth rate and the shallow recession that will occur and is expected by the year end

Speaker 0:
after an AN in 2022 2023 is expected to be an an in bonds market.

Speaker 0:
Tourism

Speaker 0:
the first recession was most likely avoided in Europe.

Speaker 0:
The consensus is converging towards a very moderate growth scenario, so the debate is feeding with low volatility and lower risk of premium.

Speaker 0:
Second,

Speaker 0:
in our view,

Speaker 0:
the resilience of inflation should lead central banks to maintain restrictive policies throughout the year

Speaker 0:
with, however, the near end of acquired cycle.

Speaker 0:
So what are the opportunities for fixed income in 2023?

Speaker 0:
2023 is a year of bonds, Whether it's interest rates, credit or green bonds, we think there are a lot of opportunities if I go into details

Speaker 0:
on serene moments.

Speaker 0:
Record funding requirements in 2023 should push nominal yield yields. Higher

Speaker 0:
yield curve should stay flat and spread should tighten.

Speaker 0:
The car is positive again on government bonds in fixed income market. We see opportunities to a in portfolio after rate hikes

Speaker 0:
on Chris.

Speaker 0:
Yield on both euro investment rate and euro are a 10 year high. At the beginning of 2023

Speaker 0:
financials looks more attractive than Corporates and subordinated debts and hybrid debt. Even more finally go green.

Speaker 0:
Sustainable bonds remain in high demand to finance the green transition. The bucket remain dynamic, and this are cheap. The green or green premium is not an obstacle, given the substantial rise in yields.