Richard "Dickie" Hodges, Manager of Nomura's $2.5bn Global Dynamic Bond Fund, shares his fixed income market view

Strategy & Positioning – Looking Forward

Geopolitical risks remain elevated and continue to represent a key source of uncertainty for financial markets. While risk assets have proven relatively resilient so far, volatility could increase at any time should geopolitical tensions intensify. Recent developments in the middle east with signs the conflict could be broadening will remain a focus.
Global growth dynamics are still positive and the US economy continues to demonstrate underlying strength however consumption has been declining more recently as a result of higher interest rates and post-GFC bond yield highs. AI-driven fixed investments remain supportive and the engine of bright spots in US growth. The US Non-Farm Payrolls print in August was above expectations indicating strength in the US labour market, but questions remain about the sustainability of this in Q4’26.
Although the risk of persistently elevated inflation cannot be dismissed, we continue to believe current market expectations for US monetary policy remain too hawkish. As long as the risk of meaningful second-round effects on inflation remains contained, we see little justification for the elevated level of future Fed rate hikes which are now discounting a further 90bps increases by the early summer next year. It is clear that Chairman and Governor of the Federal Reserve, Warsh established some credibility at the cost of political criticism and the wrath of President Trump.
Government bond yields across developed markets have moved higher. This is not only due to higher energy prices. Increasing public debt levels across most advanced economies also warrant higher risk premia. We continue to see more attractive opportunities in selected local emerging market sovereign bonds together with hard currency CEEMA, where yields remain compelling and fiscal positions are, in many cases, considerably stronger than those of developed market peers.
We also maintain a positive view on financial bonds, both senior and subordinated (AT1s). European banks delivered another solid earnings season, underlining the sector’s healthy fundamentals. We therefore expect credit spreads to remain broadly supported by the underlying strength of bank balance sheets and profitability. We expect a large proportion of our AT1 positions will be called in the next few years given costly coupon resets. This we believe will be re-invested at more attractive spreads and higher all-in levels of yield affording us the opportunity to generate greater returns in both capital and income.
Overall, we remain committed to our balanced positioning. While maintaining meaningful exposure to risk assets (financials, emerging markets, convertibles), we continue to pair this with balanced CDS hedging, allowing us to participate in market upside while aiming to limit downside risks during periods of severe market stress.

SFDR Disclosure
The EU Sustainable Finance Disclosure Regulation (“SFDR”) entered into force on 10 March 2021. SFDR requires firms to better inform end-investors with regard to the integration of sustainability risks, the consideration of adverse sustainability impacts, the promotion of environmental or social characteristics, and sustainable investment, as applicable. Disclosure of the above for Nomura Funds Ireland and its individual sub-funds can be found in the prospectus. The Nomura Global Dynamic Bond Fund is an Art. 6 fund under SFDR.

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Strategy & Positioning – Looking Forward

Geopolitical risks remain elevated and continue to represent a key source of uncertainty for financial markets. While risk assets have proven relatively resilient so far, volatility could increase at any time should geopolitical tensions intensify. Recent developments in the middle east with signs the conflict could be broadening will remain a focus.

Global growth dynamics are still positive and the US economy continues to demonstrate underlying strength however consumption has been declining more recently as a result of higher interest rates and post-GFC bond yield highs. AI-driven fixed investments remain supportive and the engine of bright spots in US growth. The US Non-Farm Payrolls print in August was above expectations indicating strength in the US labour market, but questions remain about the sustainability of this in Q4’26.

Although the risk of persistently elevated inflation cannot be dismissed, we continue to believe current market expectations for US monetary policy remain too hawkish. As long as the risk of meaningful second-round effects on inflation remains contained, we see little justification for the elevated level of future Fed rate hikes which are now discounting a further 90bps increases by the early summer next year. It is clear that Chairman and Governor of the Federal Reserve, Warsh established some credibility at the cost of political criticism and the wrath of President Trump.

Government bond yields across developed markets have moved higher. This is not only due to higher energy prices. Increasing public debt levels across most advanced economies also warrant higher risk premia. We continue to see more attractive opportunities in selected local emerging market sovereign bonds together with hard currency CEEMA, where yields remain compelling and fiscal positions are, in many cases, considerably stronger than those of developed market peers.

We also maintain a positive view on financial bonds, both senior and subordinated (AT1s). European banks delivered another solid earnings season, underlining the sector’s healthy fundamentals. We therefore expect credit spreads to remain broadly supported by the underlying strength of bank balance sheets and profitability. We expect a large proportion of our AT1 positions will be called in the next few years given costly coupon resets. This we believe will be re-invested at more attractive spreads and higher all-in levels of yield affording us the opportunity to generate greater returns in both capital and income.

Overall, we remain committed to our balanced positioning. While maintaining meaningful exposure to risk assets (financials, emerging markets, convertibles), we continue to pair this with balanced CDS hedging, allowing us to participate in market upside while aiming to limit downside risks during periods of severe market stress.

Richard "Dickie" Hodges, Manager of Nomura's $2.5bn Global Dynamic Bond Fund, shares his fixed income market view

Strategy & Positioning – Looking Forward

Disclosures

Policies

Strategy & Positioning – Looking Forward

Disclosures

Policies

​

Richard "Dickie" Hodges, Manager of Nomura's $2.5bn Global Dynamic Bond Fund, shares his fixed income market view

Strategy & Positioning – Looking Forward

​

​

Strategy & Positioning – Looking Forward

Disclosures

Policies