Nicholas Ware, Co-Portfolio Manager of Henderson Diversified Income Trust, talks about the challenges being faced by fixed income investors, what the bond market is telling us about a potential recession, and the integration of ESG within fixed income.

Key Takeaways:

• Bond markets have struggled year-to-date as the war in Ukraine, higher inflation, and the prospect of tighter monetary policy have weighed on investor sentiment.
• With inflation peaking/beginning to peak, valuations are becoming more attractive, particularly within investment grade credit markets.
• The two-year and ten-year US Treasury yields inverted in April, reflecting investor concern about the US Federal Reserve Bank raising interest rates amid slowing global growth.
• Environmental Social and Governance factors are increasingly becoming important for fixed income investors and the Trust excludes certain industries, especially resource heavy sectors like energy.

Catch up on previous episodes of Trust Radio

Glossary Terms Expand

Inflation – The rate at which the prices of goods and services are rising in an economy. The CPI and RPI are two common measures.

Inverted yield curve – An inverted yield curve occurs when short-term interest rates exceed long-term rates. Under normal circumstances, the yield curve is not inverted since debt with longer maturities typically carry higher interest rates than nearer-term ones.

Monetary policy – The policies of a central bank, aimed at influencing the level of inflation and growth in an economy. It includes controlling interest rates and the supply of money. Monetary stimulus refers to a central bank increasing the supply of money and lowering borrowing costs. Monetary tightening refers to central bank activity aimed at curbing inflation and slowing down growth in the economy by raising interest rates and reducing the supply of money