Events overtook our feature from Gill Wadsworth this week as the UK entered another round of political chaos, having had six Prime Ministers in a decade, with a seventh on its way after Sir Keir Starmer’s resignation on Monday.
That news came as we were en route to the Fund Forum event in Monte Carlo and what is notable is how little it has been mentioned, a sign that everyone is weary with the UK’s revolving door political scenario and the impact of Brexit, also on a 10-year anniversary.
The Bank of England’s decision to keep interest rates at 3.75 per cent suggests a weak outlook for the UK economy, economists have said, and George Brown, Senior Economist at Schroders, said the BofE is “playing for time rather than going on the attack”, noting that rising inflation expectations have earned a yellow card from a couple of hawkish dissenters, but the majority are content to wait for interest rate rises which may not come until next year.
Against this backdrop, Egbert Bronsema, portfolio manager European ABS, Aegon Asset Management, writes that for all the recent optimism in global markets, risks haven’t disappeared, they’ve simply shifted.
“From a technical standpoint, European ABS continues to benefit from a supportive backdrop. Demand remains firm and continues to absorb supply, helping to stabilise spreads even as broader market conditions fluctuate,” Bronsema says.
“At the same time, relative value remains a key consideration. Compared to corporate credit, ABS still offers attractive spreads for the level of risk, particularly when viewed alongside its shorter duration profile and lower sensitivity to interest rate volatility.”
Beverly Chandler, Managing Editor, Institutional Asset Manager
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