ICE Fixed Income Monthly
For many investors, 2023 reinforced the relative appeal of fixed income as the Fed hiked rates for a second year. It also spotlighted advancements in the asset class since rates were last this high: the digitization of trading and wider availability of data continues to boost transparency, access, and liquidity. As markets adjusted to a more normalized rate backdrop, some interesting themes emerged. The perception that loan diversification equates to risk diversification was reversed as many investors sought the comfort of knowing the details associated with a single loan. Treasuries and municipal bonds showed unusually high correlation, suggesting potential for more porous volatility contagion. And more recently, the relationship between key volatility indicators -- the stock market’s VIX, and the bond market’s ICE BofA MOVE Index -- has unraveled, with the VIX signaling relative calm while the MOVE is slightly higher.
Please see our newsletter for more, including themes we’ll be watching in the new year: