High-Yield
Highlights Below-Benchmark Portfolio Duration: Bond investors should keep portfolio duration low in 2022. While the market’s pricing of the expected Fed liftoff date and initial pace of rate hikes is reasonable, terminal fed funds rate expectations are far too low. Own Treasury Curve Steepeners…
Highlights Chart 1Curve Flattening Is Overdone
Curve Flattening Is Overdone…
Highlights Fed: Until more is learned about the omicron variant, our base case view remains that the Fed will lift rates later than what is currently priced in the market. We think a September or December 2022 liftoff date is reasonable. Treasuries: Our main Treasury curve investment…
Dear Client, This week, the US Bond Strategy service is hosting its Quarterly Webcast (November 16 at 10:00 AM EST, 15:00 PM GMT, 16:00 PM CET and November 17 at 9:00 HKT, 11:00 AEST). In addition, we are sending this Quarterly Chartpack that provides a recap of our key recommendations and some…
Highlights Chart 1Buy The 2-Year, Sell The 10-Year
Buy The 2-Year, Sell The 10-Year…
Highlights The market pricing of the ECB is too aggressive. More so than in the US, temporary factors explain the European inflation surge. Energy, taxes, and base effects account for the bulk of the price increases. In contrast to supply shortages, European labor shortages are small and…
Highlights Energy Prices & Bond Yields: Surging energy prices are lifting inflation expectations in the US and Europe, while at the same time dampening consumer confidence amid diminished perceptions of real purchasing power. These conflicting trends are putting central banks in a tricky…
Highlights Spread Product: Investors should stay overweight spread product versus Treasuries for now (with a preference for high-yield corporates over investment grade). But recent shifts in the yield/spread correlation suggest that the credit cycle is getting a bit long in the tooth. We will…
Highlights Chart 1Bond Yields Still Track The "Re-Opening" Trade
Bond Yields Still Track The "Re-Opening" Trade…
Highlights Investment Grade: Investment grade corporate bond total returns will be close to zero or negative during the next 12 months. The bonds are also likely to outperform duration-matched Treasuries during that period, but excess returns are probably capped at 85 bps. High-Yield: High-…