US Fixed Income Investors No Longer Fear Inflation Says Invesco Fixed Income Study

Staff Report

Tuesday, January 30th, 2018

Invesco Ltd. releases its first Global Fixed Income Income Study, an in-depth report on the investment behavior of fixed income investors. The study, conducted face-to-face interviews with 79 fixed income specialists and CIOs across North America, EMEA and Asia Pacific, shows that 58 percent of the fixed income investors interviewed believe the global economy is on the path to recovery, but not the typical normalization, which has historically occurred after an economic slump.

According to the study, US investors no longer fear that inflation will accelerate as a result of quantitative easing, but instead the majority expects moderate growth and little inflation risk.

"This consensus tells us why yields are so low," says Rob Waldner, chief macro strategist at Invesco. "The big risk for investors is that they are underestimating inflation risk in a strong global economy."

The study also uncovered that there is a strong appetite for alternative credit, such as bank loans and real estate debt.

"The range of sub-asset classes within fixed income has grown significantly over recent decades and now spans a broad range of diverse investments to include bank loans and real estate," says Waldner. While traditional core fixed income assets continue to play a foundational role in many fixed income portfolios, alternative credit is expected to increase in institutional fixed income investors' portfolios."

Another finding is that pension funds with large funding deficits are looking for tailored solutions, especially around liability matching.

"Active management is still important to US fixed income investors, and we are poised to create tailored solutions for clients specific to their needs."