GAM's Active Thinking 22 November 2024
Atlanticomnium’s Romain Miginiac discusses the strong fundamentals of European banks and his latest perspective on the pricing of extension risk. We believe there has never been a better time to be a bondholder in subordinated debt issued by companies in the financial sector, benefitting from a boost in profitability on top of rock-solid fundamentals. As shown in Chart 1, the return on equity (ROE) from the banking sector is expected to remain high over the next 12 months. Previously, before interest rates were significantly increased, the return on equity was around 6% to 7%. Now, in the foreseeable future, we are looking at ROE of 10% or more.
Latest blog post from the Multi-Asset Team:
UK inflation jumps to six-month high
Was it awkward or just to be expected? Or even both? UK CPI inflation rose to 2.3% on the previous year for October, up from 1.7% in September. The official reason not to worry is that this merely reflected the recent raising by 10% of the energy price cap last month. UK Bank of England (BoE) Governor Andrew Bailey attempted to smooth things over by talking about a “gradual approach” to the easing of monetary policy, presumably to allow time and space to absorb all these ‘one-offs’ that are getting in the way of the neat narrative of linearly falling inflation and therefore in time, looser monetary policy too. Read more.
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