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Inside The Bond Market

Aug 06 2018

US Bonds

  • Aug 6, 2018

While we believe overall volatility is likely to stay high, both interest rates and investment grade spreads are at reasonably attractive levels to provide a downside cushion.

Aug 06 2018

Risk Aversion Index: A New “Lower Risk” Signal

  • Aug 6, 2018

Our Risk Aversion Index fell enough last month to generate a new “Lower Risk” signal. This is certainly not a “no brainer” risk-on signal. We recommend higher quality spread products within fixed income.

Aug 06 2018

2018 Time Cycle—Mid-Year Update

  • Aug 6, 2018

2018 has been very atypical so far. But if the historical pattern is any guide, a near-term pull back should be expected in most equity markets, followed by nice year-end rallies.

Aug 06 2018

Risk Barbell Or Middle Of The Road?

  • Aug 6, 2018

The underperformance of investment grade credit this year prompted the question of whether a risk-barbell portfolio of safe Treasuries and risky high-yield bonds may offer better performance than a middle-of-the-road portfolio of 100% investment grade corporate bonds in a highly-uncertain environment.

Jul 07 2018

US Bonds

  • Jul 7, 2018

Political risks linger and the M&A picture remains active.

Jul 07 2018

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Jul 7, 2018

We believe the negative impact of central bank liquidity reduction is here to stay for the foreseeable future. We recommend defense within fixed income.

Jul 07 2018

Investment Grade Widened More Than High Yield: Implications & More

  • Jul 7, 2018

As credit spreads widened, something rather unusual happened: investment grade Corporate bonds performed far worse than High Yield bonds.

Jun 07 2018

US Bonds

  • Jun 7, 2018

Political and geo-political concerns linger while we are entering a seasonally unfavorable window. Maintain Neutral.

Jun 07 2018

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Jun 7, 2018

Volatility among non-equity asset classes has gone up noticeably while the VIX dipped lower. We still expect volatility to stay high and continue to play defense within fixed income.

Jun 07 2018

All Crowded Trades Are Vulnerable—Even The Yield-Curve Flattener

  • Jun 7, 2018

Bond market volatility picked up quite a bit in May but the higher-low/higher-high pattern in the 10-year yield is still intact, indicating the primary uptrend has not reversed.

May 05 2018

US Bonds

  • May 5, 2018

Volatility has stayed high as political and geo-political concerns linger while the central bank liquidity reduction is underway. 

May 05 2018

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • May 5, 2018

We expect volatility to stay high and still recommend defensive positions within fixed income.

May 05 2018

Rates & Credit At A Major Crossroads—A Few Things To Watch

  • May 5, 2018

 April saw a valiant attempt by the U.S. 10-year yield to crack the upper band of the multi-decade downtrend channel (around 3.0%-3.05%).

Apr 06 2018

U.S. Investment Grade Corporate Bonds: Maintain Neutral

  • Apr 6, 2018

Our overall view toward credit has turned decidedly cautious over the last couple months and that includes our long-term favorite.

Apr 06 2018

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Apr 6, 2018

While concerns about a trade war might be easing and the credit market has been largely unaffected by the surge in Libor rates, we have to recognize the fact that Trump’s policy focus has become increasingly market-unfriendly while global central banks are in a liquidity-reducing mode.

Apr 06 2018

Trade War & Libor—More Bark Than Bite?

  • Apr 6, 2018

Isn’t a trade war more bark than bite? We think a full-blown trade war may be eventually negotiated away but the process is not necessarily painless to investors.

Mar 07 2018

US Bonds

  • Mar 7, 2018

Higher volatility when credit spreads are already thin makes even the higher-quality issuers less immune to credit sell-offs. We tactically reduced these bonds to Neutral.

Mar 07 2018

Risk Aversion Index: A New “Higher Risk” Signal

  • Mar 7, 2018

While the late rebound in risky assets pared back earlier losses, weakness was observed in all major risk asset classes. We continue to recommend defense for the time being.

Mar 07 2018

More On The Dollar Bear Market

  • Mar 7, 2018

A potential trade war (not quite there yet) is not good for the dollar as it will inevitably invite retaliation and sour sentiment toward dollar assets.

Mar 07 2018

U.S. Rates: Looking For A Dip

  • Mar 7, 2018

The U.S. 10-year ended the month 15 bps higher but non-U.S. bonds fared much better with bond yields in Europe and Japan 4-5 bps lower.

Feb 06 2018

US Bonds

  • Feb 6, 2018

The net impact of the tax reform is significantly positive to investment grade companies as the interest deductibility change has very little impact.

Feb 06 2018

Risk Aversion Index: Turned Higher But Stayed On The “Lower Risk” Signal

  • Feb 6, 2018

Our Risk Aversion Index turned higher last month but stayed on the “Lower Risk” signal as of the end of January. The first few days of February brought a big surge in this index and would suggest a “Higher Risk” stance for the near term.

Feb 06 2018

Anatomy Of A Dollar Bear Market

  • Feb 6, 2018

With the dollar index breaking below the 2017 low, we believe the dollar bull market that started in 2011 (based on the trade-weighted dollar index) is most likely over.

Jan 06 2018

US Bonds

  • Jan 6, 2018

The new tax bill will be another tailwind for these bonds as Corporate bond issuance is likely to be reduced going forward.

Jan 06 2018

Risk Aversion Index: New “Lower Risk” Signal

  • Jan 6, 2018

Our Risk Aversion Index turned lower in December and reached an all-time low. We remain favorable toward higher quality credit within fixed income.

Jan 06 2018

2018 Time Cycle—Beware A Fall Correction

  • Jan 6, 2018

The most common 2018 time-cycle pattern among major markets is a fall correction, with the U.S. and Japan faring better than their European counterparts.

Jan 06 2018

Four Divergences—A Steepening Correction

  • Jan 6, 2018

While we still believe flattening is the more likely scenario over the medium term, we do feel the recent flattening move is a bit overdone and there are several divergences that suggest a short-term steepening correction is in store.

Dec 07 2017

US Bonds

  • Dec 7, 2017

These bonds were quite stable during the credit sell-off in November and they remain good candidates for earning the carry.

Dec 07 2017

A New “Higher Risk” Signal

  • Dec 7, 2017

The index ticked up on the back of higher VIX, a High Yield credit mini sell-off, and EM underperformance. We are turning a bit more cautious toward credit but still recommend safe spreads within fixed income.

Dec 07 2017

Anatomy Of A Flattening Cycle—Flatter For Longer

  • Dec 7, 2017

The calm appearance of the 10-year yield masked a big curve-flattening move that has accelerated the last few months.

Nov 07 2017

US Bonds

  • Nov 7, 2017

If the new tax plan gets passed, Corporate bond issuance will likely decrease while demand remains strong.

Nov 07 2017

RAI Stayed On “Lower Risk” Signal

  • Nov 7, 2017

The range-bound interest rate action provides a friendly environment to earn the carry, through moderate duration and high grade credit exposure.

Nov 07 2017

Two Curves, One Theme

  • Nov 7, 2017

Our data shows the traditional Phillips Curve relationship between the unemployment rate and wage inflation still holds.

Oct 05 2017

US Bonds

  • Oct 5, 2017

The proposed corporate tax cut and the elimination of interest deduction are likely to reduce Corporate bond issuance while demand should remain strong.

Oct 05 2017

Risk Aversion Index: Stayed On The “Lower Risk” Signal

  • Oct 5, 2017

We believe the “Goldilocks” environment is still intact. Earn the carry.

Oct 05 2017

Balance Sheet Reduction ≠ Higher Rates

  • Oct 5, 2017

Overall, the impact of balance sheet reduction on interest rates is weak, at best. Inflation is a much bigger longer-term driver of interest rates.

Oct 05 2017

U.S. Rates: Range Intact, Bias Higher

  • Oct 5, 2017

The mini bond market sell-off in September was fueled by a string of positive developments, which should support the case for further upside in the Economic Surprise Index in the fourth quarter.

Sep 08 2017

US Bonds

  • Sep 8, 2017

Corporate leverage is likely to plateau in the second half of the year, helped by a much improved Energy sector.

Sep 08 2017

Risk Aversion Index: Stayed On The “Lower Risk” Signal

  • Sep 8, 2017

With the “Goldilocks” scenario still intact, we believe earning the carry is the right approach and high grade credit fits the bill.

Sep 08 2017

Goldilocks—Alive And Well

  • Sep 8, 2017

If we look beyond the daily noise from North Korea, the global macro picture still fits our “Goldilocks” view pretty well.