Risk assets rallied further in February due to optimism on US-China trade talks

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Risk assets rallied further in February due to optimism on US-China trade talks, low volatility, and positive sentiment from the Federal Reserve’s dovish pivot in January. As US Treasury prices declined, the rate curve steepened, with two-year and 10-year rates trading higher by 5 and 9 basis points (bps), respectively. We acknowledge tighter valuations across credit-related asset classes generally, but still see select issuers with positive dynamics and sectors trading at significant discounts to par, creating total-return opportunities – especially in communications, financial, and energy. As a result, our target allocations remain unchanged. Ahead, since late-cycle dynamics and tighter financial conditions may drive increased rate and market volatility, our positioning remains nimble and open to a mid-month allocation change if warranted.