Explore FICC
FICC | Bonds
Actionable asset allocation recommendations for your bond portfolio, drawing on macro analysis of interest rates and global debt market dynamics. Typically published weekly.
The European Central Bank has achieved a soft landing. Inflation is back to target, with well-anchored inflation expectations. The unemployment rate is historically low, and real economic growth is stable, albeit weak. Given that little to no additional easing will come from the ECB, investors should underweight government bonds relative to equities.
The August employment report showed a modest increase in labor market slack, enough to cement a 25-basis-point rate cut this month.
EM sovereign and corporate credit spreads are set to widen. Within a global credit portfolio, maintain a neutral allocation to EM credit markets versus US corporate credit. Favor EM local currency bonds over EM USD bonds.
The Norges Bank will cut rates only once until year-end as the NOK weakens and inflation hovers around 3%. Expect aggressive easing next year as the economic recovery is delayed by weakness in the energy sector and the labor market deteriorates.
The cost of tariffs is falling on the US consumer, not foreign exporters or US firms.
In a widely anticipated move, the RBA resumed cutting rates. However, with housing, consumption, and PMIs improving, we see little scope for the RBA to ease beyond market expectations.
This morning’s CPI report marginally tips the scales in favor of a September rate cut.
The BoE is easing, but risks falling behind. Labor and growth cracks are starting to emerge, and the Bank may soon be forced to move more decisively. This report outlines why gilts remain a buy and sterling’s path is diverging vs. USD and EUR.