FICC
One macro framework for rates, FX, credit, and commodities, helping investors connect cross-market signals and position with clarity and conviction.
In this report, we explore what a new BRICS+ union means for the dollar over the next 6-to-9 months.
The Fed and ECB talked a good game as they redoubled their commitments to returning core inflation to 2% p.a. at Jackson Hole. However, their outmoded inflation-fighting playbooks do not address supply tightness in commodity and energy markets, which keeps inflation risk elevated. The proposed expansion of the BRICS states seeks to capitalize on these trends, and supports efforts to weaken the centrality of the USD in global trade. We remain long commodity exposure via ETFs to retain exposure to energy and metals producers and refiners.
We comment on Jay Powell’s Jackson Hole speech and recommend shifting to a barbelled allocation along the Treasury curve.
In this report, we review our FX trade recommendations with suggestions on how to position for the next few months.
In this report, we assess the best opportunities in inflation-linked bonds in the major developed economies, based on trends in growth, inflation and the stance of monetary policies in each country. We conclude that the environment is turning more challenging for European inflation-linked bond performance versus nominal government bonds, while the opposite is true in Japan. In the US, US TIPS breakevens have likely peaked, particularly at the short end.
Most diagnoses of China’s liquidity trap miss the point that policies arising from these theories were developed for market-based economies with governments accountable to their electorates, not autocracies pursuing autarky. As the CCP widens and deepens mass-mobilization campaigns, the echo of the Cultural Revolution will grow louder and lead to further retrenchment by households and firms. China has space at the center for significant fiscal stimulus, which, if deployed, could break its liquidity trap and boost commodity demand.
While the bearish bond trade currently has a lot of momentum, we continue to think that Treasury yields are close to a cyclical peak and will be lower on a 6-12 month horizon.
In this special report, we discuss whether the economic conditions necessary for a stronger yen (and higher JGB yields) will materialize over the next 12-to-18 months.
We continue to expect China to deploy stronger fiscal and monetary stimulus to avoid prolonged deflation brought about by a liquidity trap and sub-zero growth. All the same, a lower-growth risk has been added to our ensemble forecast. We expect Brent to trade at $94/bbl in 2H23, and $120/bbl next year. WTI will trade $4 – $6/bbl lower.