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Potential Fixed Income Opportunities in the US Banking Sector
Friday 19 May 2023
Investment Talks
Potential Fixed Income Opportunities in the US Banking Sector
May 2023 | Our assessment is that most banks are much better prepared to withstand financial volatility today than they were in 2008-9. As a result of the systematic application of much greater regulatory oversight, US banks have much higher levels of equity capital, better funding and liquidity, less leverage and much lower asset risk. With the potential for stronger supervision and regulation across the sector, we suggest investors carefully select securities from larger, well-capitalized banks with diversified business models and conservative lending strategies.
01 | Despite alarms of “financial system contagion” highlighted by recent headlines, we believe that recent banking failures are not representative of the industry as a whole.
02 | As a result of the relative attractiveness of issuer yields and spreads, we believe that US global systemically important banks offer compelling, long-term value.
03 | With the potential for stronger supervision and regulation across the sector, we suggest investors carefully select securities from larger, well-capitalized banks with diversified business models and conservative lending strategies.
Important Information
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of May 18, 2023. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.
Other news
04/23/2024
Investment Talks
Remain agile in bond selection, with an eye on last mile inflation
Though the US economy and consumers appear to have largely defied the "gravitational pull" of significantly tighter monetary policy, we continue to view the risk of a recession during 2024 as higher than normal. We expect that such a recessionary scenario would lead to significantly greater interest rate cuts, while the "no landing" scenario of more persistent inflation would delay the start of rate cuts. As developed economy central banks continue to grapple with when to start normalizing local monetary policy, now could be an interesting time for investors to strengthen their portfolios by extending the duration of their fixed income portfolios and raising credit quality and liquidity profiles while carefully weighing global opportunities.
04/17/2024
Investment Talks
US High Yield Market Outlook and Positioning
Although first-quarter returns proved to be anemic, at least they were consistent. Across the quarter, monthly returns were positive and spreads moved tighter. With inflation's decline stalling, short-term rate expectations stabilized. Within high yield, Treasury yield increases largely negated the effects of tighter spreads, leading to returns near the index's coupon yield. Although CCCs were the best performers in the US and globally, the US High Yield Distressed Index (comprised of issuers with spreads over 1000 basis points) underperformed the broader US high yield market, indicating investors were more interested in high-yielding bonds than in potential workouts.
04/05/2024
Investment Talks
Bonds Take Center Stage
For most of the last year, savers have been earning a reasonable return in cash. But how long can these compelling cash rates last? Historically, the answer has been: not very long. In every rate hike cycle since the 1970s, the US Federal Reserve has “paused at the peak” federal funds rate for a matter of months, not years, and history suggests the rate cuts could begin soon. With history as a guide, we believe investors may benefit from locking in some of today’s historically elevated interest rates by moving out of cash and into short-term bonds.
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