FICC

In this week's report, we review the impact of political developments, as well as incoming fundamental data, on our positioning.

Our labor market indicators have softened meaningfully during the past month but aren’t yet signaling an imminent recession. That said, the Fed can no longer ignore the labor market with the unemployment rate above 4% and rising.

Our Portfolio Allocation Summary for July 2024.

Special Report

In this report, we try to gauge how long the exceptional performance of the US can last, but from a more nuanced angle – inflows into US assets and the impact on the dollar and bond yields. Our work suggests that investors should not make any huge bets on the dollar today, but should be short over the longer term (3-5 years). Empirical evidence also suggests you want to be long US bonds into any downturn, relative to global-ex-US duration-matched government securities, but that view becomes less certain if the global economy avoids a downturn in the next few months. What is interesting in this report are high some conviction views across currencies, bonds and precious metals.

Special Report

We consider the relative merits of four different fixed income investments in the current economic environment: 2-year Treasuries, 10-year Treasuries, Baa-rated corporate bonds and current coupon Agency MBS.

In light of this week’s RBA decision to keep policy on hold, we look at the best possible trades in fixed income markets. In our view, inflation-linked bonds, relative to nominals remain a good bet.

In this insight, we update our thinking on the recent BoJ move in terms of positioning for the yen and JGB yields.

Our reaction to this morning’s CPI report and this afternoon’s FOMC meeting.

The ECB is now firmly in easing mode, even if it refuses to pre-commit to a specific rate path. What does this data dependency mean for the euro and European yields?

US Treasury yields bounced after this morning’s employment report. We offer our updated views about how long the recent trading range will hold.