FICC | Bonds

The Fed hiked 25 basis points at yesterday’s FOMC meeting while also signaling that the tightening cycle is now on hold. We discuss the short-run and long-run implications for Treasury yields.

This week we present our Portfolio Allocation Summary for May 2023.

First Republic Bank’s earnings report showed how its struggles have exaggerated the perception of other banks’ distress. Ex-FRC, the banking system appears to be coping with the post-Silicon Valley Bank turmoil pretty well.

Special Report

This Special Report discusses why there is a non-negligible risk that the US Congress will not reach a timely agreement to lift the debt ceiling this summer. It also discusses what will happen in bond markets in the lead up to the debt limit and in the case where a deal is not reached in time.

This report looks at the relationship between rate risk and credit risk and how it has changed over time. It also makes the case for favoring agency MBS within an underweight allocation to US spread product.

Special Report

In this Special Report, we evaluate future prospects for the Australian dollar and Australian government bonds. The currency remains fundamentally cheap, and positioning is very short, but the AUD will continue to underperform in the near-term due to sluggish global growth. Australian government bonds have had a nice run of outperformance over the past year, but it is now time to take profits with given the uncertainty that the RBA will deliver the rate cuts currently discounted.

Today’s releases of the March CPI and March FOMC minutes do not change our view that the Fed will deliver one more 25 basis point rate increase before going on hold.

In this report, we present our performance review of the BCA Research Global Fixed Income Strategy (GFIS) model bond portfolio for the Q1/2023, and the outlook and scenario analysis for the next six months. The portfolio slightly underperformed its benchmark during the quarter as global growth showed surprising resilience to begin the year. Looking ahead, the portfolio is positioned to capitalize on an expected slowing of global growth over the rest of the year through an overweight stance on government bonds versus spread product.

This week we present our Portfolio Allocation Summary for April 2023.

This US Bond Strategy Insight takes an in-depth look at core non-housing services inflation.