Secular shifts in fixed income

Recent developments in bond markets are likely to become major themes within the fixed income sector, writes Dipankar Shewaram of Western Asset Management.

Bond market developments in recent months signal a number of shifts that, we think, will be themes in fixed income over the next couple of years. Following their strong run over the past 15 years, we think government bond markets have reached a point where downside risks outweigh upside risks and where volatility has increased and is likely to remain elevated. At the same time, credit markets have exhibited more differentiation in terms of sector and issue performance. This contrasts with recent years, when investors initially pulled their money out of the credit market in 2007 and 2008,...