A sluggish global outlook coupled with ongoing support from central banks and a search for yield quickly turned 2016 into another bumper year for fixed income. While equities appeared directionless, the Barclays Global Aggregate Bond Index climbed 4.6% to reach its July peak.
“2016 has been all about yield enhancement,” says Shaun Mallal, cross asset solutions sales, wealth management and family offices distribution, global markets, APAC at BNP Paribas, describing the limited regional demand for sourcing returns from capital appreciation.
“Widening spreads combined with low cash yields, is driving strong demand in CLNs, particularly through the shorter-dated variety.”
But investors who expected the fixed income market to be a one-way ride this year would have been disappointed by a second half reversal. This was fueled by Brexit, an improved inflationary outlook and a Trump victory – which could lead to tax cuts and increased fiscal spending.
For clients that were caught off guard by new inflationary drivers in the second half, some investment banks were able to increase the lead, by seizing upon the opportunity at this inflection point.
“We have been actively engaging our clients to deliver structured pay-offs through repackaging, indices and index tranches, and strong thematic trends,” adds Atul Sancheti, head of credit structuring, Asia ex-Japan at BNP Paribas.
“In addition, tougher markets have created more esoteric investment opportunities for our clients such as relative value trades or hybrid structures involving, for example, credit and rates.”
In recognition of its excellence in delivering a broad universe of products and, perhaps more importantly, its commitment to remaining by clients’ sides, servicing needs and presenting innovative ideas, BNP Paribas has been chosen as this year’s Best Provider of Credit-linked Structured Products.