2020 Outlook: Investment Grade Fixed Income, part 1

Timely insights from portfolio managers and industry experts on key financial, economic and political issues.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.

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      By Vishal Khanduja, CFADirector of Investment Grade Fixed-Income Portfolio Management and Trading, Calvert Research and Management

      Boston - In my view, 2020 is going to be a year of active management in fixed income.


      It'll be difficult to repeat the absolute returns that we saw in 2019. I believe that in 2020, skilled active managers will have the opportunity to truly show their value.

      We're coming into the new year, 2020, at much lower yields and much tighter spreads in the credit sectors.     

      You compare that to the end of 2018, as we were ready to enter into 2019. Interest rates were higher, central banks were still directing the markets that they're going to be raising rates. Credit spreads were widening out as financial conditions had started to tighten. The potential returns in 2019 were much higher, and that's what we saw happen in our markets.

      In 2020, I think we're going to see lower potential returns and slightly higher volatility.

      Bottom line: I believe that some of the benchmark sectors are fairly to slightly overpriced, at this point, as we enter into 2020. Strategies that have the flexibility to go outside the benchmark, to seek opportunities to outperform, are more likely to thrive in 2020.