Geopolitical concerns and rising government debt are the biggest risks facing fixed income markets over the next 12 months, according to a survey of financial advisers and wealth managers by Nedgroup Investments.

About 45% of respondents see geopolitical instability and energy price volatility as the greatest risks to fixed income over the coming year, according to the survey. Growing government bond issuance came second (44%), while others highlighted persistent inflation and interest rate volatility ( 42%).

Central bank divergence and currency movements were also a concern for 38% of respondents, including differences in the policy paths of the European Central Bank and US Federal Reserve.

About 32% identified the potential for deteriorating credit quality as a risk. Heavy corporate bond issuance was cited by 29%, with the survey linking some of the expected supply to increased capital expenditure related to AI.

About 57% of financial advisers and wealth managers said new bond supply, including issuance from high quality companies, could provide opportunities for investors to capture additional spread. 55% said growing differences between sectors and individual issuers would create opportunities for active managers to generate alpha.

Tom Caddick, MD at Nedgroup Investments, said: “Recent events have reinforced how quickly market conditions can shift, making careful risk management and active management more important than ever.

At the same time, it’s encouraging that advisers are looking beyond the headline risks and identifying compelling opportunities. Increased issuance from high quality corporates, alongside greater dispersion across sectors and issuers, should create a richer environment for active managers to add value. In periods like these, disciplined credit research and a selective approach to portfolio construction can help investors uncover attractive risk-adjusted returns while remaining resilient to ongoing market volatility.”