Fixed Income
The US retail sales report delivered a sanguine update on US consumption. Overall spending increased by 0.7% m/m in September – above expectations of a 0.3% m/m rise and following an upwardly revised 0.8% m/m in August. The details of the report were also…
Results of the Banks of Canada’s Q3 business and consumer surveys reveal that the aggressive tightening cycle is dampening economic agents’ sentiment. Putting aside the sharp decline at the onset of the pandemic in Q2 2020, the Business Outlook Survey (BOS)…
Yields remain the force dominating the evolution of markets. A peak in yields would help European assets rebound, but the war in the Middle East could push higher energy prices, with negative consequences for Europe.
On the surface, Chinese credit data sent a positive signal about the domestic economy. Chinese aggregate social financing totaled CNY 4.1 trillion in September – exceeding both August’s CNY 3.1 trillion and expectations of CNY 3.7 trillion. However, details…
Back in May, our foreign exchange team suggested the risk to sterling was to the downside. Indeed, GBP/USD is down 8% from its recent peak. While dollar strength largely explains this move in GBP/USD, there have been other fundamental factors at play. The…
The last few weeks saw a repricing of nominal yields to levels not breached since before the Great Financial Crisis. Breaking down the US 10-year Treasury yield into real and inflation expectations components reveals the selloff was mostly driven by the…
According to BCA Research’s Counterpoint service, the sharp sell-off in long duration bonds (ticker TLT) has reached the collapsed 130-day complexity that has preceded several turning-points in the last few years. This suggests a two-thirds probability of a…
US monetary policy is restrictive, as evidenced by a falling jobs-workers gap. The reason that unemployment has not risen is because labor demand still exceeds supply. That will change in the second half of 2024 when the US economy succumbs to recession. Investors should increasingly favor bonds over stocks.
Comments on recent Fedspeak, bond market moves and this morning’s CPI report.
The minutes of the September FOMC meeting confirmed that the Fed intends to maintain restrictive monetary policy for longer. Although inflation has been moderating, participants continue to view it as unacceptably high and emphasized that they remain “highly…