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
    Macro trends in the US and Europe are diverging. Growth has pulled ahead in the US, but inflation is falling faster in Europe. We discuss the differing macro drivers and what this divergence means for markets.
  • Credit
    Climate adaptation has become an important investment theme, as climate change impacts societies in many ways. As governments seek funding to adapt to climate risks, private investors can help close the financing gap by tapping a new market for climate adaptation bonds. We give a brief overview of this growing market.
  • Interest rate outlook
    We remain positive on European interest rates. In our view, the current level of yields presents an attractive investment opportunity. We believe the European Central Bank (ECB) will cut interest rates more sharply than the market anticipates as inflationary pressures recede further in the coming months. We maintain our overweight allocation to UK interest rates. Higher than expected inflation and wage data sent yields higher in April, but the overall macroeconomic outlook remains one of below-trend growth and decelerating inflation, meaning rate cuts may be delayed but not precluded.
  • Currency outlook
    We remain underweight the euro, based on our expectation that the ECB will start its interest rate cutting cycle. We expect the Bank of England to cut rates in the second half of the year, given the soft growth outlook. This will likely undermine the pound’s high yielder status, and could cause depreciation versus the US dollar and potentially against the euro and yen.
  • A Q&A on EM debt restructuring
    We sat down with Sovereign Strategist, Manuel Terre, Senior Emerging Market Strategist, Daniel Phillips and Portfolio Manager, Claudia Castro to talk about EM debt. Recent restructurings point to encouraging improvements in the debt-workout landscape, including possible improved outcomes for bondholders.


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.