5 Global Trends That Will Affect Fixed Income Research in 2022

Fixed income is a form of investment security with which investors get fixed interest and dividend payments until the plan matures. Fixed income research refers to providing research support to banks, capital market firms, and financial institutions. It aims at determining the value of a security based on risk profile assessment, which may include risks associated with interest rates, debt default, market supply, and security demand. Here, we will uncover five global trends likely to affect fixed income research in 2022.

  1. Increased Fixed Income Indexing

Nearly 66% of senior-level managers in pension funds, wealth managers, asset management firms, and sovereign wealth funds prioritised increased usage of fixed income indexing for liquid, or broad core fixed income exposures. Around 33% currently implement fixed income indexing strategies. 44% have plans to increase indexing allocations to the high yield, while 35-37% plan to raise them to emerging market debt, sovereign debt funds, investment grade corporate debt, and global aggregate. Institutional investors are not satisfied with the current fixed strategies due to lower costs, high liquidity, and unreliable benchmark returns.

  1. Emerging Market Bonds

Investment management companies are expected to add sovereign bonds to the index that will open up the market to institutional investors across the globe. As far as fixed income research is concerned, priority will be given to dedicated, standalone fixed income exposure in various countries. Companies with the highest asset level under their management will prefer such exposure more than others. Institutional investors are likely to use index and active strategies to allocate their emerging market debt on their fixed income portfolios.

  1. Increased Bond ETFs

70% of managers prioritise increased bond ETFs (Exchange Traded Funds) added to their portfolios with almost 50% share. They plan to boost their current bond ETF holdings within global aggregate/core and non-core/satellite fixed income portfolios. The reasons behind increasing bond ETFs may be enhanced transparency, speedy execution, ease of use, lower costs, and multiple liquidity benefits. 

  1. Environment Social and Governance 

ESG refers to sustainable investing in measuring a company’s ethical contribution to the stakeholders and its impact. Nearly 61% of managers prioritised integrating ESG in their fixed income portfolios. Many of them stated that they plan to use Exchange Traded Funds for their ESG fixed income allocations. 

  1. Interest Rates and Inflation 

A fixed income asset is a debt security that delivers regular payments until maturity. These include municipal bonds, government debts, corporate bonds, deposit certificates, and others. Interest rates have driven up in the face of inflation, and investors now need to compete with newer high-percentage bonds. They are unlikely to find buyers for their bonds for their total face value.Knowledge partners specialising in fixed income research have in-depth knowledge of the market, ranging from macroeconomic factors to financial instruments. With updated knowledge of the local market, they can provide constant access to helpful information. This information can benefit investment banks and asset managers looking to upgrade their fixed income portfolios and gain maximum benefit. Keeping up with the latest trends in the field of fixed market research, you may gain the most from your fixed market investments.

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