FICC
One macro framework for rates, FX, credit, and commodities, helping investors connect cross-market signals and position with clarity and conviction.
This week, we review our currency positions, based on the latest data from G10 economies.
Qatar’s strategy to raise LNG output 84% by 2030 is a bold bet DM demand for energy security – and EM demand for affordable electricity to support economic and population growth – will remain a higher priority than eliminating fossil-fuel consumption over the next 20 years. This will accelerate the development of a global LNG spot market, which will increase demand for LNG tankers.
In this Strategy Insight, we take a comparative look at two of the largest spread product sectors in Europe – Italian government bonds and investment grade corporates. We make the case for favoring Italy over investment grade in the event of a downturn in European economic sentiment.
In this insight, we provide an update on the Norwegian krone, with attractive trade ideas over a long-term horizon. Shorter-term, our neutral-to-positive view on the dollar keeps us on the sidelines for USD/NOK.
Naturally occurring hydrogen as a clean-energy source has the potential to satisfy significant energy demand growth at low cost. Oil and gas E+P companies and pipelines are ideally positioned to take a leading role in this clean-energy evolution, given their core competencies include large-scale resource extraction, storing and transporting gaseous commodities. Blending gold hydrogen with natural gas in pipeline systems could accelerate the industry’s learning curve in finding and delivering clean-energy fuels.
The first in a series of Strategy Insights where we present a checklist for extending duration in each major government bond market. This first entry focuses on the US.
Seasonal weather and price variability in the first quarter will dissipate, which will reduce the agita caused by the recent inflation scare. This will increase the Fed’s comfort level in initiating a rate-cutting cycle in June with a 25 bp cut. With inflation well-behaved, real interest rates will move lower and gold prices will move higher. The rate-cutting cycle also will allow the USD to weaken as assets ex-US become more attractive; this will be bullish for gold. Physical demand for gold is expected to remain robust, along with safe-haven and central-bank diversification demand, due to heightened geopolitical uncertainty. We continue to expect gold to trade above $2,200/oz this year.
We rank the US spread sectors in terms of risk versus reward.
Could a second wave of global inflation be underway? The latest inflation prints in the US and UK showed upside surprises, while there is evidence of increased price pressures in global manufacturing. Combined with the improvements seen in economic sentiment measures and leading economic indicators in the US and Europe, and potential upside risks to oil prices, we see a strong case for owning more inflation protection in global bond portfolios. Inflation-linked bonds look attractive in this environment, especially in the US.