Fixed income indexes had mixed performance in October, equity market volatility originating from uncertainties across the globe spread to fixed income markets. The Bloomberg Barclays Global Aggregate Bond Index and US High-yield bonds went up by 0.10% and 0.51%, while US Investment Grades and Emerging Markets US dollar Bonds lost 0.18% and 0.12% respectively.
The US elections remain the biggest concern in the investment markets, global equity markets saw heightened volatility as the elections closed in. Capital stayed on the sidelines awaiting redeployment, resulting in the slight fall in the credit market as yields rose. However, high yields had a positive month as credit spreads narrowed with the ongoing governmental fiscal support, plus an improving operating environment as the covid epidemic is being tackled on.
In the reminder of the year, we expect fixed income to stay positive as central banks remain supportive of credit markets via (1) extended low interest rate environments, and (2) ongoing quantitative easing plans. In particular, the Bank of England increased its scale of asset purchases in its most recent interest rate meeting, while the European Central Bank mentioned that it would increase supportive measures if the current 2nd wave epidemic continues. The US Fed didn’t offer further increases in its QE plans, but the Fed promised to extend the low interest rate environment, which also provides material support to the fixed income markets.