Global Fixed Income Strategy Monthly Report

2022 in review paul jackson

In our regularly updated macroeconomic analysis, we offer an outlook for interest rates and currencies – and look at which fixed income assets are favoured across a range of market environments. 

Global Fixed Income Strategy Monthly Report

In this edition:

  • Macro
    At our May Investors’ Summit, we maintained our strategic view that the global disinflationary trend is intact, and the risk of recession is low. We provide a summary of the key macro conclusions from the Summit.
  • Credit
    Municipal bond market performance was challenged in the first quarter, but it may have provided an interesting entry point for investors. Moreover, we have just entered an historically strong seasonal period for US municipals, one that typically starts in May and lasts through August.
  • Interest rate outlook
    We are positive on European rates and see the current level of yields as an attractive investment opportunity, especially at the front end of the yield curve. We maintain our overweight allocation to UK interest rates. May’s Bank of England (BoE) meeting sent a dovish message overall, supporting expectations that policymakers could cut rates as soon as June if data broadly follows their forecasts.
  • Currency outlook
    We are underweight the euro, given that, in line with our expectations, the European Central Bank (ECB) began to lower interest rates, as inflation in the region falls toward target. We are neutral on the British pound. If the BoE follows the ECB and cuts rates this summer, interest rate differentials are unlikely to be supportive going forward.
  • A Q&A with credit experts
    We sat down with a panel of asset class experts to discuss their latest thoughts on credit markets at our May Summit. They noted that, while investors appear to be embracing higher yields on offer, tight spreads mean that returns are likely to be driven by carry. We provide highlights of their discussion.


Whether you’re looking for income, diversification, capital preservation or total returns, our global fixed income teams have the strategies, the scale and the flexibility needed to match your objectives as markets evolve.

We have more than 200 fixed income specialists who invest across regions, investment styles and capital structures. Their expertise spans the entire fixed income spectrum, covering credit, rates and currencies.

  • $313.72 billion in fixed income assets under management
  • 45+ years investing in fixed income markets

Source: Invesco as of 31 December 2022.

Fixed income investments can offer several important benefits to investors:

  • Diversification: Adding fixed income securities to a portfolio can help diversify it and reduce its overall risk, as bonds typically behave differently to other investment instruments like equities.
  • Risk reduction: Fixed income investments are deemed less risky than stocks, as the issuer is contractually obliged to meet the income payments and repay the principal sum on the redemption date. In the event of bankruptcy, fixed income instruments also sit higher up the capital structure than equities. This means that the issuer will meet its debt obligations before looking after its shareholders.    
  • Liquidity: Many fixed income securities are highly liquid and can be easily bought and sold in the market.

While fixed income securities are deemed less risky than equities, there are still some key things to look out for:

  • Interest rate risk: When interest rates go up, bond prices go down. This is because, in the new higher rate environment, new bonds will be issued on more attractive terms. As such, investors looking to sell their existing bonds will need to do so at a discount in order to compete.
  • Inflation risk: When investors buy a bond, they commit to tying their money up for a set period of time. If inflation is high or rises during the lifetime of the loan, its value will be eroded and their money will have less purchasing power when it is repaid on the redemption date. Inflation also erodes the purchasing power of the income earned.
  • Credit risk: When you invest in a business or government, there is always a risk that they will go bankrupt and fail to repay the loan. Furthermore, if they run into difficulties, they may struggle to meet interest payments and default on their obligations. Fixed income investors should carry out thorough credit analysis before buying a bond to make sure the issuer is financially sound.
  • Market risk: If an investor is unable to hold a bond until maturity and needs to sell it on the secondary market, price fluctuations resulting from the overall performance of financial markets could lead to losses.
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Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. 

Important information

  • This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.