Fixed Income

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Our 2020 fixed income outlook: Near term, the environment is reasonable, but markets living their best...
January 2020

BMO US Fixed Income Team

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Risk Disclaimer

The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

Changes in rates of exchange may reduce the value of your investment.

Changes in interest rates can affect the value of fixed interest holdings and may adversely affect the value of your investment.

In this note, our fixed income colleagues in the US set out their thoughts for the themes they envisage shaping US bond markets in 2020.

Themes include:

  • Clearer Fed communication? From their fourth rate hike in December 2018, the Fed completely changed direction and cut rates a total of three times through 2019, accompanied with decidedly garbled market communication. The optimist in us would like to believe that Fed messaging will be more consistent through 2020.
  • Decreased corporate leverage. The post-rate hike deleveraging in the US corporate sector in 2018, initially continued into 2019, but the lure of cheap money proved too strong and there was a rebound in debt issuance in 2019 overall. Recent projections are for a decrease in issuance in 2020, which we would welcome, but will also monitor closely.
  • Election year for the US: deficits to continue. Disappointingly, the only party that cares about government spending is the one out of power – our main political prediction for 2020 is that whichever party wins, government deficits will continue.
  • Sufficient support for markets in 2020. We believe that there is sufficient support, in fundamental, technical and policy terms, for markets to perform well in 2020.

With fixed income specialists located in Miami and London, BMO Global Asset Management is well positioned to identify opportunities across global credit markets including high yield and investment grade issues. Our team combines bottom-up research with top-down insights and robust risk management discipline – a process applied across a range of products that includes benchmark aware and total return, global or regional fixed income products.

Risk Disclaimer

The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

Changes in rates of exchange may reduce the value of your investment.

Changes in interest rates can affect the value of fixed interest holdings and may adversely affect the value of your investment.

Use our handy glossary to look up any technical jargon you are unfamiliar with.
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