Regional Fixed Income Market Watch, December 2024

Central banks signal slower easing ahead
Both the Federal Reserve and the European Central Bank delivered 25bps rate cuts in Dec-24, while signaling a slower pace of cuts in 2025. The Fed now projects 2 cuts next year, down from 4 cuts previously anticipated, with both institutions emphasizing a data-dependent approach amid lingering inflation risks.

Trump policies add inflation uncertainty
Market focus remains on President Donald Trump’s proposals on trade, taxation, and immigration, which could drive inflation higher. While the Fed hasn’t fully incorporated these into its outlook, Chair Powell acknowledged their potential impact. 

Opportunities in fixed income persist
As the yields remain higher-for-longer, the fixed income market continues to offer value, with intermediate-duration bonds balancing attractive yields and lower interest rate risk. High-quality corporate credit also presents opportunities for stable income amid ongoing economic uncertainty.

Regional markets 

In regional sovereign Eurobond markets yields on the bonds of Kazakhstan, Turkey, and Georgia increased, while Armenia experienced a 10bps drop. Increase was the most profound in Georgian sovereign Eurobond yield (+63bps) driven by the ongoing political uncertainties, but still remained 52bps lower compared to its peak in spring 2024 (7.99%).