Interest rate market outlook 2024

The outlook for interest rate markets in 2024 remains positive for fixed-income investors.The themes remain the same as last year, namely the inflation trend and central banks’ monetary policy.

Inflation is a key driver of interest rate market movements. In late 2023, lower-than-expected inflation figures were reported on both continents, inspiring confidence among investors that central banks will cut interest rates this year. Barring further shocks, inflation will continue to decelerate this year and monetary policy will finally change direction. Markets are already pricing in several rate cuts this year, both in the US and in the euro area. However, Robert Holzmann, Governing Council member of the European Central Bank, threw a spanner in the works by saying that talk of interest rate cuts is premature.

For the fixed-income investor, the end of rate hikes would be welcome news. The sharp rise in interest rates weighed down bond values significantly in 2022. The end of interest-rate increases alone and the possibility of rate cuts have boosted yield expectations for this year well into positive territory. For the risk-tolerant investor, the high-yield market offers an excellent destination for fixed-income investments again this year. Short-term funds, on the other hand, remain a good alternative to banks’ time deposits with low risk. Even if central banks do cut interest rates, there is no return to zero interest rates in sight.

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The information presented is based on UB’s own estimates and sources considered reliable by UB. The information on which the conclusions are based may change quickly and UB Group may revise its market view without prior notice. No information obtained through this presentation should be construed as a solicitation to invest. When making investment decisions, readers should base their decisions on their own assessment of the investment and the risks involved, and to consider their personal goals and financial situation.

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