FICC

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.

In this week’s report, we look at the current de-dollarization discussion within the context of the USD’s near-term cyclical outlook, and whether it warrants a bullish or bearish stance.

We are increasing our gold price target to $2,200/oz, given the increasing risk of fiscal dominance in the US, rising geopolitical risk, the return of trading blocs and currency debasement risk. These risks also will increase economic uncertainty, which also will be bullish for gold.

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.

The Gulf’s political economy – particularly that of KSA – drives the supply side of oil-price discovery. This has been evolving since 2017, when OPEC 2.0 was formed. It is now fundamental to the market. We expect Brent to average $95/bbl this year, unchanged from last month, and $115/bbl (up $5/bbl vs. last month). WTI will trade $4-$6/bbl below Brent over the forecast interval. We remain long the XOP and COMT ETFs.

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.

In this week’s review, we look at recent data and its impact on currency markets.