FICC

Financial markets were taken on a wild ride between Wednesday and Friday of this week, with hugely important monetary policy meetings in the US, euro area and UK along with a rash of economic data. Despite all the news, noise and market volatility, the underlying message for monetary policy and bond yields in the US, euro area and UK is unchanged.

This US Bond Strategy Insight discusses what we learned from yesterday’s FOMC meeting and press conference, and discusses the implications of the market’s reaction.

Special Report

This week’s Special Report goes over the structural problems facing the UK economy and our outlook for UK gilts and the sterling following turbulent moves in 2022.

Special Report

This week’s Special Report uses our Golden Rule of Bond Investing to forecast US Treasury returns for 2023 under different economic scenarios.

Fed Governor Lael Brainard delivered an important speech last week in which she laid out the intellectual justification for the Fed to soon pause its rate hike cycle. This week’s report reviews her arguments and explains how they inform our monetary policy and investment views.

This insight presents an outlook on USD-Denominated Emerging Market Bonds.

In this Strategy Insight, we assess the best and worst opportunities for inflation-linked bonds within the major developed markets. We see a case for underweighting inflation protection in the euro area, while overweighting Japanese inflation-linked bonds with the Bank of Japan moving away from yield curve control at a time of relatively high Japanese inflation.

The Fed will respond to December’s CPI report by downshifting to a 25 bps hike pace next month. We anticipate two more 25 bps hikes before the Fed goes on hold.

In this report, we present our review of the BCA Research Global Fixed Income Strategy (GFIS) model bond portfolio for the full calendar year 2022 and the initial outlook for 2023. We envision a changed game plan for fixed income investing this year, as the focus of bond investors begins to shift from high inflation to slowing global growth. In this environment, asset allocation decisions between government bonds and spread product – rather than duration management – will represent the more important expected driver of bond portfolio performance.

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