FICC

This week’s report examines three potential catalysts that could push Treasury yields meaningfully higher within the next few months. We also consider the rebuild of the Treasury’s cash holdings and its implications for the Fed’s balance sheet policy and financial markets.

In this Insight, we discuss the currency and bond market implications of last week’s ECB and Bank of Japan policy meetings. The conclusion: the ECB is on a path to an overly hawkish policy mistake, while the Bank of Japan’s dovish stance is growing more unsustainable.

This Strategy Insight discusses the bond market and currency implications of the Fed’s “hawkish pause”.

A preview of what to expect from next week’s FOMC meeting.

In this Insight, we answer a few crucial questions: Do the BoC and RBA decisions have any impact on what we can expect from other major central banks next week? Are there any profitable trades that can be put on, given the recent hawkish shift by these two central banks? How should global bond investors be positioned in a fixed income portfolio?

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

Special Report

It is easy to claim that the ECB is failing in light of today’s elevated inflation readings. Yet, the reality is more subtle and the ECB’s performance lays the ground for stronger growth ahead.

The Fed is still on track for a June pause, even after May’s strong nonfarm payroll print.

In this report, we follow up on the upgrade to our US duration stance from last week with a review of our rates views and government bond allocations outside the US. We conclude that while we now find US Treasuries to be more attractive from a value perspective, even better value is available in euro area and UK government debt.

The latest selloff in US Treasuries has left yields at attractive levels from a risk/reward perspective. We are therefore raising our recommended duration stance in the US from neutral to overweight.