High Yield Return Scenarios

Elevated starting yields provide cushion for default and maturity wall concerns

What is “normal” for long term Treasury yields?

After a period of historic stimulus, the era of financial repression is coming to an end which means more income for bond investors over the longer term.

Federal Open Market Committee Statement: November 2023

Following the Fed’s announcement, find our latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. rates team.

How much protection will the USD offer you in a global recession?

We believe any US dollar rally in a global recession will be short, shallow or may not even take place at all…learn why.

FOMC Statement: September 2023

Following the Fed’s announcement, find out latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. rates team.

Solvency Capital Requirement

Using rating transition matrices to formulate a view on expected solvency-related capital charges in corporate bond portfolios

Don’t you…forget about bonds

Despite short-term volatility, bond markets still offer compelling opportunity

FOMC Statement: July 2023

Following the Fed’s announcement, find out latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. rates team.

Are we there yet?

The Fed is driving the bus toward higher for longer, while the market continues to probe from the back seat. We explore three paths that rates can take from here.

China: Should we be worried about local government implicit debt?

Recently, China’s local government made headlines on the implicit debt issue, but we believe the issue is manageable and that systemic risk is unlikely.

Leveraging rating transition matrices

We analyze forward-looking rating transition matrices in US Corporate Credit markets and lay out how they can be informative when making investment decisions.

Peering over the ratings cliff

We focus on the information contained in the rating transition probabilities within the BBB/BBB- and BB/BB+ rating cohorts with a view to identifying potential fallen angels and rising stars.

Student loan moratorium: A lot of moving parts

The expiry of the student loan payment moratorium represents a meaningful shock to certain borrowers’ finances. We sought to identify exactly which consumers are most impacted and quantify the impact to their finances.

Cash Trap

Using history as a road map should lead investors to embrace high quality fixed income rather than shying away from it in favor of the cash trap. This is especially true as the end of the Fed’s hiking cycle is on the horizon and yield curves are highly inverted.

FOMC Statement: June 2023

Following the Fed’s announcement, find out latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. rates team.

The unintended consequences of tuition discounting

The rate by which U.S. colleges and universities discount student tuition continued to rise in the 2022-2023 academic year, contributing to our negative view on the higher education sector.

A framework for analyzing CLO managers

As the largest holder of US leveraged Loans, Collateralized Loan Obligations (CLOs) are in focus given the current macroeconomic context. We introduce a quantitative and qualitative framework for analyzing and differentiating CLO managers we invest in.

China Real Estate: Still very relevant on Earth

China's property market, once galactic in scale, has shrunk considerably. Will it follow Japan’s path and enter a lost decade? We think not, but volatility will persist.

China: More broad-based funding cost decrease

In this blog, we explore why Chinese authorities are guiding down household investment return and why this guidance could anchor CGB yields in the medium term.

A framework for prediciting composite bond rating changes

This blog presents a framework for constructing rating transition scores to predict composite bond rating events. The approach capitalises on momentum in bond ratings, published rating agency credit watch flags and the replication of index composite rating methodologies.

FOMC Statement: May 2023

Following the Fed’s announcement, find out latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. rates team.

China: Growth Perception Gap

After the strong China Q1 GDP reading, we noted a view difference between onshore and offshore markets. In this Blog, we highlight the potential reasons for why the onshore market holds a more cautious view than the offshore market.

What if America sneezed and no-one cared?

The Federal Reserve are currently priced to cut rates over the next two years with little feedthrough to the other major central banks. This blog investigates the divergent trends in the US and the rest of developed markets and tackles the question of whether the Fed can pause and subsequently cut rates without dragging the rest of the world with them.

It’s Playoff Season for the Fed

The stakes are raised as the Fed approaches the end of the hiking cycle. Making the case that the time to pause is now.

China NPC March Meeting Recap

In the blog, we provide the key takeaways from NPC meetings on the Government Work Report, personnel change, and institutional reform.

FOMC Statement: March 2023

Following the Fed’s announcement, find out latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. rates team.

March Market Madness

With volatility surging again, we look at the recent performance of fixed income sectors and discuss the potential drivers going forward. Can Agency MBS go from a bracket buster to a Cinderella story?

Assessing credit trends in ABS auto deals

The US consumer remains dynamic as the economic landscape rapidly evolves. Read about our latest consumer insights powered by alternative data, which help demystify the drivers behind recent ABS performance.

ESG Engagement with Petroleos Mexicanos (PEMEX)

An important part of our long-term investment strategy is actively engaging with issuers on financially material ESG issues. Read about my recent engagement meeting with PEMEX.

Revisiting the case for dollar weakness

The factors that led to US dollar appreciation in 2022 are inflecting. We examine what this changing trend means for the future of currency markets.

FOMC Statement: February 2023

Following the Fed’s announcement, find out latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. rates team.

Back to the Transitory Future

What if inflation was transitory all along? Exploring the growing case that the Fed has made sufficient progress and tightened enough.

Goodbye 2022… and good riddance

2022 was a rocky year for bond investors, but there is cause for cautious optimism in 2023.

State of the Union

With the U.S. Federal Reserve continuing to tighten and recession risks rising, we assess the financial state of U.S. debtors from state and local finances to corporates and consumers. We conclude that governments, corporations, and consumers are well-positioned in 2023.

Five Realistic Surprise Predictions for 2023

Every December, we try to come up with predictions for the New Year. We believe these predictions have at least a one in three probability of materializing – making them realistic while not necessarily our base case. We also judge that they are not currently priced in the markets – making them surprises relative to investor positioning.

EM Corporates Outlook for 2023

Resilient fundamentals defined 2022. What should we expect in 2023?

Finding Value in Fallen Angels

The global economy continues to face macroeconomic headwinds and growing recession risks from tightening financial conditions. In this blog, we analyze a relative value approach to fallen angels.

FOMC Statement: December 2022

Following the Fed’s announcement, find out latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. rates team.

5 Realistic Surprise Predictions for 2022

What does 2022 have in store for fixed income markets? Read on as Bob Michele & Kelsey Berro shares 5 realistic predictions for the New Year.

FOMC Statement: September 2021

Following the Fed’s announcement, find our latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. Rates team.

Multiple reasons for multi-family

The agency CMBS market offers an attractive way for fixed income investors to access one of the more resilient sectors of the commercial real estate market.

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

2020 Annual Bond Market Awards

Back by popular demand, we present Bob Michele's annual "Bond Market Awards" - including central banker of the year, villain in a leading role, rookie of the year, MVP, bond of the year and more! 

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

'Blue ripple' and the USD outlook

The ‘Blue wave’ the market had prepared for now appears to be more of a ‘Blue ripple’ and currency markets are adjusting to a different political outlook.

Add extra guacamole for a dollar!

Emerging Markets Local Currency debt emerged as one of our best ideas at our most recent investment quarterly meeting. This isn't just about the US Dollar; we like what we see in local EM.

Is there green in the graying baby boomers? Why we like non-profit tax-exempt senior living bonds

At our recent IQ meeting, we concluded municipal high yield was one of our best ideas. In this piece we take a deep dive into one of the more opportunistic sectors in the tax-exempt market.

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

Emerging Markets: Don’t Fight the Central Banks

The opportunity cost of not investing in EM debt remains very high. Most importantly the same applies for the rest of fixed income: don’t fight the central banks.

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

A Road to Recovery

In response to Europe’s biggest growth shock in a generation the EU council agreed on the outline of the “Recovery Fund” to help cushion the economic fallout from the pandemic.

A new era for alpha generation in local emerging markets?

The global savings glut has been driving asset price valuations for the last decade or so. Emerging Markets and investors need to prepare for a potential new world.

Will a “Blue Wave” carry UBI onto the shore?

The potential outcomes of the U.S. elections could usher in more than just higher taxes.

CLOs: not the CDOs of yore

Recent headlines have compared today’s CLO market to the subprime mortgage market of old; we do not believe CLOs pose system risks to the financial system.

China’s Interest Rate Pivot

While China’s post-Covid-19 economic data is showing signs of normalization, the government’s focus on stability will have significant implications for monetary policy and interest rates

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

Emerging Markets: From Beta to Value

Investors fled emerging markets ahead of the pandemic, but are now slowly returning. We expect a gradual economic recovery to continue to support returns, and seek to rotate into select beta.

Confirmation, Conflict, Hope

Top of mind insights from our Global CIO

The United States of COVID

Now that the US has entered the beginning stages of the reopening process, we discuss the speed in which the US economy can rebound with a focus on systemically important States and politics.

COVID-19 era: addressing top investor questions

COVID-19 uncertainties abound. With the help of the team, Andrew tries to tease out a macro view through answering vexing questions.

Treasury’s 20-20 vision

Next week the Treasury will re-introduce 20-year bond issuance as they look to manage increasing borrowing needs and capitalize on growing demand for long bonds by LDI investors.

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A longer road back for corporates

Liquidity provision doesn’t remedy a weak outlook for corporate fundamentals. Thoughtful sector and security selection is needed to navigate the minefield ahead.

Monetary financing – crossing the line?

We expect bond markets to remain sanguine about the shift to unprecedented monetary financing until there are signs that the economy is emerging from the downturn.

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

Is the Bond Market Dead?

The bond market isn’t dead, but to deliver a reasonable return we need to balance the safety of co-investment alongside central banks with the opportunistic hunt for higher yield and return.

Challenges in EM during current pandemic

EM valuations reflect much of the outlook ahead, but the uncertain COVID-19 impact remains a downside risk. As such, we remain defensive, favoring EM investment-grade credit.

Where will the cash go?

With the appearance of COVID-19 and the extreme market sell-off in risky assets, in the space of 3 months investors have aggressively been buying money market funds.

The PBoC – Rate Cuts and Policy Clarification

The Peoples Bank of China recent policy actions help address the concerns that its policy response was lagging the aggressive actions taken by other central banks.

Emerging Markets Debt – Time to Buy?

The last four weeks have created deep value and at current levels EM IG offers an attractive alternative with less credit risk and the prospect of double-digit returns.

What is next for US Inflation?

Given the dramatic shift in the global economic outlook as a result of COVID-19, US inflation will slow but the market may be too pessimistic.

Thou Shalt Fund….and Shalt Not Fail

As the Coronavirus Aid, Relief, and Economic Security (CARES) Act emerged from on high in the Senate, it became clear to me what this meant for fixed income investors.

High Yield Valuations in the Age of Coronavirus

As all asset classes have repriced over the past few weeks, the Global High Yield Team believes looking at leveraged credit valuations in the context of historical bear markets can provide actionable insights for investors.

The week the bond market broke, and the week everyone put It back together

The bond market was broken, but policy makers and market leaders worked around the globe to fix the system.

Getting the market back on its feet

Market functionality needs to be restored no matter how anyone feels about the methods it may take to get there. If the current market conditions persist, the consequences may be severe.

Waiting it out. . .

Volatility across markets has created considerable anxiety amongst investors trying to gauge the effectiveness of global response from healthcare, monetary and fiscal policy. Given how varied the responses are, this may be an unsolvable riddle over the near term

Emerging Market Investment Grade: Market Well Held

With markets down across the globe, we are writing to tell you that EMD has not delivered a homogenous drawdown. Instead, there has been a resilience in our arena that is worthy of comment.

If you give a mouse a cookie…

The Fed’s emergency cut significantly increased the odds of returning to the zero-lower bound in 2020.

Shock, crisis, rinse, repeat

We’ve seen Fed rate cuts before, during the 2008 crisis—this one removes a question mark for the economy.  Now small businesses also need support.

Make the Fed Cut Again

While no one knows for certain what 2020 or 2022 will bring to the White House and the Fed, staffing changes and increasing political pressure within the Fed is a near-certainty.

Singapore Dollar – no longer defying gravity

The Singapore Dollar is no longer defying gravity – we discuss why and the implications for cash investors.

Key macro risks for bond portfolios in 2020

We assess the key macro risks investors should be thinking about in 2020 and their potential impact on global bond portfolios.

The ECB's strategy review: Actions speak louder than words

With the ECB quickly running out of tools and inflation still some way from their current target, the market will be keen to hear what comes next.

The current evolution of the mortgage market

Bubble alert? Not so fast, mortgage credit availability has slowly emerged from extinction. Read our insights on the current evolution of the mortgage market.

Taxable munis in 2020: Opportunity knocks

The taxable municipal market is expected to see a spike in supply and more diversified issuance. We explore the potential opportunity for investors.

5 realistic surprise predictions for 2020

Our team puts forth predictions around fixed income market returns, Treasury yields, gold and the U.S. presidential elections.

2019 annual bond market awards

We present our bond market awards for 2019 - including central banker of the year, villain in a leading role, rookie of the year, MVP, lifetime achievement award and more.

PBOC: small move, strong signal

We look at why the People’s Bank of China’s (PBoC) made its recent and notable dovish pivot and its implications for investors

FOMC statement & potential impact on fixed income

Following the Fed’s announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

Emerging markets debt: stronger than it’s ever been

In our view, emerging markets debt deserves the positive attention it has been receiving in an era of central bank interference and global hunt for yield.

Fun in funding land

We think the Fed’s actions have assuaged some concerns about short-term funding but risks still remain.

The forest and the trees

When constantly watching financial markets and following the 24-7 news flow, it can be easy to get caught up in the trees and miss the forest.

Chinese property - a paradigm shift

Chinese property is one of the largest sectors in the Asia high yield bond universe, and is often considered as one of the “safer” sectors by investors.

FOMC statement & potential impact on fixed income

Following the Fed's recent announcement to cut rates, we discuss our views on the meeting and our outlook on monetary policy.

Pension and insurance strategies: when traditional measures fail to capture the risk for income focused portfolios

Clients look to income focused strategies to meet their objectives, but traditional metrics of risk may not be appropriate for income focused strategies.

Emerging markets and the negative yield conundrum for fixed income investors

Record low bond yields pose a major problem for fixed income investors. We explore why taking active FX risk can be a solution for investors.

RBA: uncharted territory for unattainable goals

The Reserve Bank of Australia cut its overnight rate to a new record low - leaving the RBA in uncharted territory.

Negative rates – how low can you go?

It seems the global financial system has gone crazy as rates continue to fall further negative. We review why and the impacts it has on the market.

Silver bullets are not magnetic

I explain why a whatever-it-takes policy approach is not a silver bullet and will eventually lead to pain.

No longer “why” but “how”: the case for emerging markets debt matures

In a world where real yield is increasingly scarce, it is our view, emerging markets debt deserves a larger role in a global fixed income portfolio.

Watch the lag: thoughts on core CPI (part 2 – an update)

We analyze which economic indicators the Fed should pay attention to and which ones are false alarms.

Passing the baton to fiscal

ECB governors are agreement that it's time for fiscal policy to now take the baton from monetary policy as the main instrument to stimulate the economy.

Trading the thrill of the ECB chase

We review July's ECB monetary policy and determine the impacts on the ECB and the Eurozone.

What does the bond market know that the stock market doesn’t?

Why is the stock market at near all-time highs, while the bond market is signaling recession?

“Technically” speaking the US high yield market has strong price support

Even as markets price in recession risk, we look at how the technicals in the high yield market is as important as solid fundamentals in the short term.

EM central banks – the case for an asymmetrical beta to the fed

EM Central Banks have a relatively high beta to Fed policy rates. We believe EM Central Banks will deliver a significant cutting cycle across most countries.

FOMC statement & potential impact on fixed income

Looking beyond the disappointing press conference, we believe the FOMC is employing a proactive risk management approach as opposed to a reactionary policy.

10 year US treasury yields are headed to 0%?

The central banks must take the lead, and it must start this month. They must bring front end real yields so low, so fast that the yield curve steepens.

Summertime state of play for the central banks

If central bankers can engineer another dovish course correction which prolongs the global economic expansion in real terms, it will be a job well done. 

Narrative whipsaw

We see many different narratives driving markets, and we address the impact of a binary change in the short-term outlook for growth and financial asset prices.

Introducing ‘GAMP’ – generally accepted monetary principles

What seemed like unconventional and bizarre monetary policies in the immediate post-crisis world, have come to look generally accepted, if not pedestrian.

Moore rate cuts or a world of Cain?

President Trump has been presented with the opportunity to make a profound impact on the Federal Reserve.

MMT: short-term gain vs. long-term pain

Why is everyone is talking about Modern Monetary Theory?

Talking about ending QT is not the same as doing it

The market got a dose of what no-QT feels like, but now in March, the reality of $50 billion per month of liquidity withdrawal is likely to return.

Near-term views and the three phases endgame

With the benefit of hindsight, we can summarize the past year in markets with a pretty tight fit to almost two complete cycles through the Three Phases.

5 realistic surprise predictions for 2019

Our team puts forth predictions around the yield curve, US high yield returns, 10-year Treasuries, the US dollar and oil.

2018 annual bond market awards

We highlight our awards—including corporate bond of the year, currency of the year, comeback player of the year, unsung hero, MVP and more.

The dovish course correction (ish)

According to the roadmap I’ve described all year, a dovish lean into tight financial conditions should be cause for a significant relief rally in risk assets.

Off message

We recap macro and policy evolution, and then shoehorn it into the Three Phases Model to get a near-term outlook for further market performance.

Potential pathways for higher yields

Intuition, math, the increase in Treasury supply from the budget deficit and Quantitative Tightening, it feels weird that Treasury yields aren’t higher.

Three phases update and assessment

A lot has happened since my last dispatch on the Three Phases Model. I’ll detail where I think we are in its evolution.

The case for leveraged loans

We take a in-depth look at the leverage loan market.

IOER – does the latest fed move have any practical implications for cash investors?

The Fed’s interest on excess reserves (IOER) shot to prominence following an unprecedented adjustment by the central bank. We explore its impact on investors.

More sea shells please: assessing early signs of liquidity withdrawal

We look at three charts which are seemingly unrelated, but we think each represent early signs of the impact of US monetary tightening.

The miraculous japanese labour force

Japan suffers from labor shortages and the working population is no longer growing. So how is it possible the economy just added the most number of jobs on record?

Examining offshore dollar liquidity in light of the three phases model

We focused on global central banks’ withdrawal of liquidity as the primary market driver. Now, we look more closely at USD liquidity from an offshore perspective.

Approaching the first intermission

Realized volatility in all asset prices should continue to be elevated as markets adjust in fits and starts to the new reality of liquidity removal.

China’s $3 trillion bond index inclusion

We review how the inclusion of China onshore government bonds in the Global Aggregate Index impacts the market.

The shadow productivity escape hatch

When an economy reaches full employment, productivity growth must then also occur to lift potential, otherwise inflation pressure builds. Where are we now?

Key risk scenarios for bond portfolios in 2018

We outline the key risk scenarios for bond portfolios in 2018.

Policy reversal: a play in three acts

Making market prognostications is always a tricky business, but we frame the debate in 3 phases, with Phase 1 an uncomfortable time.

2017 annual bond market awards

From bond of the year to most valuable player to comeback player of the year, we've presented our bond market awards for 2017.

Stock, flow, impulse: an update

We still believe the flow of central bank balance sheet expansion is still the dominant force driving markets, both risk markets as well as interest rates.

Quantitative tightening: many moving parts

Here we take a closer look the Fed’s balance sheet activity to show the interactions, and take a view on how QT unfolds.

What is R-star and is it rising?

Here we discuss what R-star or the real neutral rate of interest is and how it affects central banks and their ability to determine and explain policy.

A “structural reform” for the kids

We revisit a different structural reform proposal and expand on it with three key charts from the Organization for Economic Co-operation and Development.

Stock, flow or impulse?

Neither economic data nor the chaotic news cycle is the dominant force driving stock prices right now, it’s the flow of quantitative easing.

An inadvertent reprieve

The Fed has tightened policy rates four times now, and financial conditions have gotten incrementally easier/looser each time. How should we interpret this?

Natural disintegration

We examine how anticipated economic momentum over the near term is likely necessary to sustain the narrative, in effect to avoid the decay.

Printing versus burning

My optimism at the opportunity presented to the new President has given way to more skepticism. Here are the positives and negatives.

The epicenter of optimism

We share a short note to highlight one fascinating chart that in our view encapsulates the macro narrative thematically all by itself.

Alchemy is difficult and dangerous

The consequences of the Border Tax seem skewed toward a mixture of known and unknown negatives, with what looks to me like only dubious potential benefits.

Honeymoon to hangover

My optimism at the opportunity presented to the new President has given way to more skepticism. Here are the positives and negatives.

Big border tax, part 2

Part II of the Border Tax gives an update on the deep policy discussion brewing at the intersection of corporate tax reform and US trade policy.

Big border tax

There is a deep policy discussion brewing at the intersection of corporate tax reform and US trade policy. Here are two important points.

What are financial conditions and why do they matter?

There are generally four components to financial conditions analysis. Learn how each in isolation influences the economy in different ways.

How much protection will the USD offer you in a global recession?

We believe any US dollar rally in a global recession will be short, shallow or may not even take place at all…learn why.

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

CLOs: not the CDOs of yore

Recent headlines have compared today’s CLO market to the subprime mortgage market of old; we do not believe CLOs pose system risks to the financial system.

Confirmation, Conflict, Hope

Top of mind insights from our Global CIO

The United States of COVID

Now that the US has entered the beginning stages of the reopening process, we discuss the speed in which the US economy can rebound with a focus on systemically important States and politics.

COVID-19 era: addressing top investor questions

COVID-19 uncertainties abound. With the help of the team, Andrew tries to tease out a macro view through answering vexing questions.

A longer road back for corporates

Liquidity provision doesn’t remedy a weak outlook for corporate fundamentals. Thoughtful sector and security selection is needed to navigate the minefield ahead.

Monetary financing – crossing the line?

We expect bond markets to remain sanguine about the shift to unprecedented monetary financing until there are signs that the economy is emerging from the downturn.

Is the Bond Market Dead?

The bond market isn’t dead, but to deliver a reasonable return we need to balance the safety of co-investment alongside central banks with the opportunistic hunt for higher yield and return.

Thou Shalt Fund….and Shalt Not Fail

As the Coronavirus Aid, Relief, and Economic Security (CARES) Act emerged from on high in the Senate, it became clear to me what this meant for fixed income investors.

Getting the market back on its feet

Market functionality needs to be restored no matter how anyone feels about the methods it may take to get there. If the current market conditions persist, the consequences may be severe.

Waiting it out. . .

Volatility across markets has created considerable anxiety amongst investors trying to gauge the effectiveness of global response from healthcare, monetary and fiscal policy. Given how varied the responses are, this may be an unsolvable riddle over the near term

Key macro risks for bond portfolios in 2020

We assess the key macro risks investors should be thinking about in 2020 and their potential impact on global bond portfolios.

5 realistic surprise predictions for 2020

Our team puts forth predictions around fixed income market returns, Treasury yields, gold and the U.S. presidential elections.

The forest and the trees

When constantly watching financial markets and following the 24-7 news flow, it can be easy to get caught up in the trees and miss the forest.

Silver bullets are not magnetic

I explain why a whatever-it-takes policy approach is not a silver bullet and will eventually lead to pain.

Watch the lag: thoughts on core CPI (part 2 – an update)

We analyze which economic indicators the Fed should pay attention to and which ones are false alarms.

What does the bond market know that the stock market doesn’t?

Why is the stock market at near all-time highs, while the bond market is signaling recession?

10 year US treasury yields are headed to 0%?

The central banks must take the lead, and it must start this month. They must bring front end real yields so low, so fast that the yield curve steepens.

Summertime state of play for the central banks

If central bankers can engineer another dovish course correction which prolongs the global economic expansion in real terms, it will be a job well done. 

Narrative whipsaw

We see many different narratives driving markets, and we address the impact of a binary change in the short-term outlook for growth and financial asset prices.

Talking about ending QT is not the same as doing it

The market got a dose of what no-QT feels like, but now in March, the reality of $50 billion per month of liquidity withdrawal is likely to return.

Near-term views and the three phases endgame

With the benefit of hindsight, we can summarize the past year in markets with a pretty tight fit to almost two complete cycles through the Three Phases.

5 realistic surprise predictions for 2019

Our team puts forth predictions around the yield curve, US high yield returns, 10-year Treasuries, the US dollar and oil.

2018 annual bond market awards

We highlight our awards—including corporate bond of the year, currency of the year, comeback player of the year, unsung hero, MVP and more.

The dovish course correction (ish)

According to the roadmap I’ve described all year, a dovish lean into tight financial conditions should be cause for a significant relief rally in risk assets.

Off message

We recap macro and policy evolution, and then shoehorn it into the Three Phases Model to get a near-term outlook for further market performance.

Potential pathways for higher yields

Intuition, math, the increase in Treasury supply from the budget deficit and Quantitative Tightening, it feels weird that Treasury yields aren’t higher.

Three phases update and assessment

A lot has happened since my last dispatch on the Three Phases Model. I’ll detail where I think we are in its evolution.

More sea shells please: assessing early signs of liquidity withdrawal

We look at three charts which are seemingly unrelated, but we think each represent early signs of the impact of US monetary tightening.

Examining offshore dollar liquidity in light of the three phases model

We focused on global central banks’ withdrawal of liquidity as the primary market driver. Now, we look more closely at USD liquidity from an offshore perspective.

Approaching the first intermission

Realized volatility in all asset prices should continue to be elevated as markets adjust in fits and starts to the new reality of liquidity removal.

The shadow productivity escape hatch

When an economy reaches full employment, productivity growth must then also occur to lift potential, otherwise inflation pressure builds. Where are we now?

Key risk scenarios for bond portfolios in 2018

We outline the key risk scenarios for bond portfolios in 2018.

Policy reversal: a play in three acts

Making market prognostications is always a tricky business, but we frame the debate in 3 phases, with Phase 1 an uncomfortable time.

2017 annual bond market awards

From bond of the year to most valuable player to comeback player of the year, we've presented our bond market awards for 2017.

Stock, flow, impulse: an update

We still believe the flow of central bank balance sheet expansion is still the dominant force driving markets, both risk markets as well as interest rates.

Quantitative tightening: many moving parts

Here we take a closer look the Fed’s balance sheet activity to show the interactions, and take a view on how QT unfolds.

What is R-star and is it rising?

Here we discuss what R-star or the real neutral rate of interest is and how it affects central banks and their ability to determine and explain policy.

Stock, flow or impulse?

Neither economic data nor the chaotic news cycle is the dominant force driving stock prices right now, it’s the flow of quantitative easing.

An inadvertent reprieve

The Fed has tightened policy rates four times now, and financial conditions have gotten incrementally easier/looser each time. How should we interpret this?

Natural disintegration

We examine how anticipated economic momentum over the near term is likely necessary to sustain the narrative, in effect to avoid the decay.

Printing versus burning

My optimism at the opportunity presented to the new President has given way to more skepticism. Here are the positives and negatives.

The epicenter of optimism

We share a short note to highlight one fascinating chart that in our view encapsulates the macro narrative thematically all by itself.

Big border tax, part 2

Part II of the Border Tax gives an update on the deep policy discussion brewing at the intersection of corporate tax reform and US trade policy.

What are financial conditions and why do they matter?

There are generally four components to financial conditions analysis. Learn how each in isolation influences the economy in different ways.

FOMC Statement: September 2021

Following the Fed’s announcement, find our latest market views from the Global Fixed Income Currency & Commodities (GFICC) U.S. Rates team.

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

Treasury’s 20-20 vision

Next week the Treasury will re-introduce 20-year bond issuance as they look to manage increasing borrowing needs and capitalize on growing demand for long bonds by LDI investors.

FOMC statement & potential impact on fixed income

Following the Fed's announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

What is next for US Inflation?

Given the dramatic shift in the global economic outlook as a result of COVID-19, US inflation will slow but the market may be too pessimistic.

FOMC statement & potential impact on fixed income

Following the Fed’s announcement, find our latest market views from the Global Fixed Income, Currency & Commodities Team (GFICC).

The forest and the trees

When constantly watching financial markets and following the 24-7 news flow, it can be easy to get caught up in the trees and miss the forest.

FOMC statement & potential impact on fixed income

Following the Fed's recent announcement to cut rates, we discuss our views on the meeting and our outlook on monetary policy.

Emerging markets and the negative yield conundrum for fixed income investors

Record low bond yields pose a major problem for fixed income investors. We explore why taking active FX risk can be a solution for investors.

Negative rates – how low can you go?

It seems the global financial system has gone crazy as rates continue to fall further negative. We review why and the impacts it has on the market.

Passing the baton to fiscal

ECB governors are agreement that it's time for fiscal policy to now take the baton from monetary policy as the main instrument to stimulate the economy.

FOMC statement & potential impact on fixed income

Looking beyond the disappointing press conference, we believe the FOMC is employing a proactive risk management approach as opposed to a reactionary policy.

10 year US treasury yields are headed to 0%?

The central banks must take the lead, and it must start this month. They must bring front end real yields so low, so fast that the yield curve steepens.

5 realistic surprise predictions for 2019

Our team puts forth predictions around the yield curve, US high yield returns, 10-year Treasuries, the US dollar and oil.

Examining offshore dollar liquidity in light of the three phases model

We focused on global central banks’ withdrawal of liquidity as the primary market driver. Now, we look more closely at USD liquidity from an offshore perspective.

Approaching the first intermission

Realized volatility in all asset prices should continue to be elevated as markets adjust in fits and starts to the new reality of liquidity removal.

Stock, flow, impulse: an update

We still believe the flow of central bank balance sheet expansion is still the dominant force driving markets, both risk markets as well as interest rates.

Quantitative tightening: many moving parts

Here we take a closer look the Fed’s balance sheet activity to show the interactions, and take a view on how QT unfolds.

What is R-star and is it rising?

Here we discuss what R-star or the real neutral rate of interest is and how it affects central banks and their ability to determine and explain policy.

Stock, flow or impulse?

Neither economic data nor the chaotic news cycle is the dominant force driving stock prices right now, it’s the flow of quantitative easing.

An inadvertent reprieve

The Fed has tightened policy rates four times now, and financial conditions have gotten incrementally easier/looser each time. How should we interpret this?

Printing versus burning

My optimism at the opportunity presented to the new President has given way to more skepticism. Here are the positives and negatives.

Honeymoon to hangover

My optimism at the opportunity presented to the new President has given way to more skepticism. Here are the positives and negatives.

Big border tax, part 2

Part II of the Border Tax gives an update on the deep policy discussion brewing at the intersection of corporate tax reform and US trade policy.

What are financial conditions and why do they matter?

There are generally four components to financial conditions analysis. Learn how each in isolation influences the economy in different ways.