Jefferies expects 2024 to be the year of fixed income and sees rates and credit outperforming equities.
“With the economy slowing and central banks embarking on a rate cutting cycle, we would favour an overweight position in sovereign and credit bonds.”
Jefferies said valuation also favors fixed income assets over equities. One big caveat, though, is that there is a wall of issuance, particularly from the U.S., which hits the market next year, hence long positions should be concentrated toward the front end of the curve.
It said gross issuance in the U.S. will be close to $4 trillion “which is unprecedented,” adding that Europe will also see higher gross issuance, “though the scale is nowhere close to that of the U.S.”
Investor concerns stem from who would buy this debt, and the direct implications of increased issuance will be steeper curves.