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It's a Fixed Income Era

A defining moment in bond investing is occurring and the opportunity is profound, with yields at decade highs. We see opportunities in two strategic implementation ideas when allocating to fixed income:
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Capture the peak in yields in high quality bonds

With developed market central banks at or near peak rates, investors can now access higher yields while taking less risk through quality exposures such as government bonds or investment grade (IG) credit. They can also lock in these attractive yields on the curve through fixed maturity products and receive regular income along the way.

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Find opportunities in selective income pockets

In times of rising dispersion, different fixed income sectors may exhibit varying levels of returns and risk. Being nimble can allow investors to identify and seize opportunities created by these divergences, seeking to capitalise on evolving trends in particular pockets of the market such as high yield and emerging markets.

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Emerging Markets Investments
Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation.

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As investors rethink the role of bonds, many are now embracing a more nimble and selective strategy – leveraging both index and alpha-seeking solutions – to navigate the intricacies of shifting market conditions. Download our exclusive guide now.
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Investors are turning back to bonds

In this higher interest rate environment, investors are increasingly shifting their focus towards bonds as a source of income. This makes them an appealing choice for investors seeking returns amid the challenges posed by high macro volatility, above-trend inflation and tighter monetary policies.

Fixed income yields, current vs last 10 years

The conventional reliance on static allocations to broad fixed income exposures is no longer effective in this evolved economic landscape, in our view. Investors must now embrace a more nimble and selective strategy to navigate the intricacies of shifting market conditions.

Capture the peak in yields in high quality bonds

Developed market central banks appear to be at or near a peak in their rate hiking cycles. While we believe market pricing for rate cuts appears too optimistic at present, we may expect rate cuts in developed markets this year, and as these start to materialise, we remain nimble and adapt to opportunities to add duration accordingly.
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In addition to our iBonds range, BlackRock is planning to expand our fixed-maturity bond range in the mutual fund space. Exposures will be activated throughout 2024 as opportunities emerge to lock in attractive yields.

Find opportunities in selective income pockets

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The prevailing risk-off sentiment experienced in 2022 and 2023 resulted in substantial outflows from high yield and emerging market debt. We believe this has created pockets of potential opportunity in these sectors, with dispersion of returns within this part of the bond market meaning there is space for investment skill to shine. In this context, flexibility and implementing more granular views could enable investors to identify divergences arising from these fluctuations and capitalise on selective income opportunities.

Investors could also consider gaining exposure to both hard and local currency Emerging Market Debt (EMD) via a flexible, dynamic Fund that offers an all-in-one solution, providing exposure across all EMD segments.