JPMorgan Chase & Co. has continued its winning streak as No. 1 in Institutional Investor’s All-America Fixed-Income Research Team ranking for an eighth straight year.
Bank of America Corp. came in second, while Wells Fargo & Co. took third and Barclays placed fourth. While the firms’ positions were unchanged from 2016, there was movement elsewhere in the rankings. Citigroup rose one spot to No. 5; Goldman Sachs Group fell two places to sixth, after tying Barclays last year for fourth.
The rankings are based on questionnaires that II sent to bond and credit specialists at asset management firms around the world, with input from more than 1800 portfolio managers and buy-side analysts overseeing an estimated $9.9 trillion in U.S. fixed-income assets. They selected the best firms in high yield, investment grade, and economics and strategy.
“JPMorgan is complete in terms of covering all geographies and all sectors in fixed income,” John Normand, the firm’s head of currencies, commodities and international rates research, said in a phone interview. “That combination of being specialized, but also being able to highlight cross-market themes, distinguishes the bank’s product.”
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As voters ranked the top analysts, two major themes stood out: the political uncertainty in the U.S. and policy reforms. Analysts that made II’s list provided investors with insight into last year’s surprising U.S. presidential election while helping them navigate concerns surrounding rising interest rates.
Investors are closely tracking the Federal Reserve’s interest-rate policy, particularly the speed of its rate hikes, which have been slow since the 2008 financial crisis, according to interviews with several analysts.
“There’s an important debate going on at the moment about whether the Federal Reserve is pursuing the correct plan for monetary policy,” said Ian Lyngen, whose team at BMO Capital Markets topped the economics and strategy category for technical analysis and U.S. rates analysis.
Spreads have narrowed in the U.S. fixed-income market.
“In investment-grade fixed income, we’re seeing a tight market that’s been grinding higher,” said Doug Karson, an analyst at Bank of America Merrill Lynch, who ranked first for his high-yield and investment-grade coverage of the auto sector, investment-grade manufacturing and investment-grade aerospace.
“It’s due to these large inflows in bond funds and ETFs,” Karson said of lower borrowing costs for investment-grade companies. “That is creating demand for buying bonds.”
It’s also been a good time to be a borrower in the high-yield fixed-income market.
“The high-yield financials sector has benefited from investors’ increased risk tolerance, prompting outperformance and a flurry of new issues this year,” said Mark Hammond, a Bank of America Merrill Lynch analyst covering high-yield debt in the financial services sector.
The potential for tax reform is another area of focus for investors, according to James Dunn, a Wells Fargo analyst who earned the top spot for investment-grade coverage of aerospace and defense, basic industries, and manufacturing and transportation.
“We’re all watching for tax reform,” Dunn said by phone. “The question is, can Trump successfully get some tax reform done?”
Money markets are also being watched by analysts and investors after the Securities and Exchange Commission made regulatory changes last year to help prevent financial instability. The SEC’s new rules put tighter restrictions on who can invest in retail money market funds.
“Money market fund reform sounds boring, but it was undoubtedly one of the biggest stories in fixed income this past year,” Alex Roever, a fixed-income analyst at JPMorgan, said in an email. Roever’s fixed-income team clinched the top spot in the economics and strategy ranking of analysts and teams.