This is a summary of the “Quarterly macro and market insights” report from Capital Group’s fixed income team. The report indicates that the outlook for bonds remains positive despite concerns about global growth. The global economy is expected to weaken
After the Gold Rush Institutional investors forced to dig deep for opportunity as they brace for inflation or stagflation in post-pandemic markets. After seeming to recover from the pandemic in 2021, the global economy relapsed into what may be classified as a
Bad news: History tells us that once the inflation genie is out of the bottle, it can take far longer to return to normal levels than most people realize. Indeed, when Federal Reserve Chair Paul Volker took office in 1979,
Why it’s time to look at liquid alternatives in a new light: The current market environment has not been kind to traditional multi-asset portfolios, with bonds providing little offset in an equity market brought down by rising interest rates. Central
Moeten wereldwijde obligatiebeleggers, na een moeilijk begin van het jaar, George Costanza van Seinfeld volgen en tegen hun instinct in handelen? Voor obligatiebeleggers zijn het ongelooflijk moeilijke maanden geweest. Er was geen plaats om zich te verbergen, aangezien de meeste
In the wake of an unprecedented economic cycle, we have noticed an uptick in investor questions regarding direct loans. Supply chain imbalances, higher raw material costs, rising interest rates, labor shortages, and geopolitical risks each contribute to business risk— and
Investment managers at Baillie Gifford have been thinking a lot about inflation and how it affects portfolio returns in recent months. Usually, such macroeconomic questions matter less to us than the strengths of individual companies and their potential for extraordinary
It feels as though US policy makers have spent the entire post-global financial crisis period trying to generate inflation. Now that it’s here, it seems like the wrong kind of inflation. How do you see inflation playing out in the
Fixed income funds invest in bonds whose price is influenced by movements in interest rates, changes in the credit rating of bond issuers, and other factors such as inflation and market dynamics. In general, as interest rates rise the price
LDI Deep Dive Series: Part 4: LDI instrument selection Investors with long-term liabilities, like pension funds or life insurers, are normally exposed to interest rate risk because a fall in interest rates will increase the value of their liabilities. By
In a recent publication by Janus Henderson they ask the question if the recent rise in rates is sustainable. They state that the recent rise in rates has made a couple things clear, namely: The recent rise is undoing the even faster decline from last year and secondly that the initial …
Rising global bond yields and interest rate volatility have been dominant themes in fixed income markets so far this year. In our latest investment team meetings, we discussed how likely these trends are to continue—and the potential implications for bond markets and central bank policies if they do.
Capital markets are increasingly penciling in a higher interest rate scenario as reflected in a sharp steepening in the Treasury yield curve over the past 30 days. The yield on the 10-year bond has increased by 40 bps over the past 30 days. Despite dovish messaging …
The new year has awoken the bond market from its slumber. What began as a gradual climb in nominal yields from the summer accelerated in February with the yield on the US 10-year Treasury note briefly topping 1.6%, and significant moves higher globally …
The interest rate shock in the US is continuing, with 10-year government bonds now yielding around 1.6%, up with more than 60 bps since the start of the year. The confirmation of the 1.9 trillion USD stimulus bill by the US Senate this past weekend will support the trend of higher yields. Up until now, equity indices have largely shrugged off this sharp move in rates, but their overall performance hides a …
Investors with future liabilities are normally exposed to interest rate risk. A fall in interest rates will increase the value placed on future liabilities. By adopting a liability-driven investment (LDI) strategy, much of this interest rate risk can be mitigated. In this deep dive series we will investigate the most important considerations for developing successful …
Key takeaways: 1) We anticipate that the global growth recovery will remain intact as vaccine distribution will allow economies to gradually normalise, 2) Monetary and fiscal policy shall remain accommodative, 3) We expect this to be a positive environment for credit, whilst interest rate markets have room to breathe higher
#EmergingMarketDebt In December of 2020, Capital Group published an outlook for emerging market debt. In this paper the global macro environment and the development of the pandemic are pointed to as the drivers for the returns of emerging market debt
The end of a chapter! Interested in learning what caught the eye of our readers in the past few weeks? Then look no further because this article will discuss the four best read articles of our site. As we are
QIS Insights We review the current CAPE ratios to get a sense of where they currently stand, but given the low levels of interest rates across the five major economies, we also create an Excess CAPE Yield measure, defined as
U.S. Economic & Interest Rate Outlook The pandemic has made indoor activities and gatherings risky. During the summer, outdoor adventures and backyard socializing were effective workarounds. But as autumn takes hold, the cooling air will gradually limit those options. This
All-time low interest rates in Brazil are driving savings into equities, while deregulation and faster technological adoption are creating high growth opportunities for stock pickers. It is true that there is often no free lunch in investing, meaning that high
For corporate pension funds, increased exposure to long credit could help: Close the spread duration gap: European corporate pension funds are generally underweight spread duration versus their liabilities. In the current market environment, wider spreads offer an opportunity to invest
Closing Strong The month of March brought an onslaught of news requiring a daily reassessment of risks. The signs of recession are spreading: empty roads, closed stores, cancelled flights, postponed events and idled workers. Today’s circumstances defy comparison to any
US dollar, Japanese yen, Swiss franc The EURUSD is currently extremely volatile. While the euro was able to make significant gains for the time being due to the sharply reduced interest rate differential between the US and the Eurozone, a
Covid-19 is the paramount issue. We expect a sharp economic slowdown in the first half of 2020, followed by a subdued rebound. The coronavirus is likely to slow down the economy in unprecedented ways. Nonetheless, we expect the epidemic to
Short Note | Major Markets | US Fed Yesterday evening, and thus only three days before the end of the next regular meeting, the US Federal Reserve lowered the range for the key interest rate by 100 basis points to
A roundtable discussion with Aviva Investors, MACSF, Ostrum Asset Management, Périclès Acturial and SimCorp Paradoxically, while insurers should focus more on risky assets to compensate the low bond yields, they are unable, given the regulatory constraints, to develop their portfolios
THAT SINKING FEELING The U.S. Federal Reserve (Fed) unexpectedly cut interest rates by 50 basis points to a new target range of 1.00% to 1.25% on Tuesday, March 3. But U.S. yields have been falling for some time already, as
How will the ECB react? Next week's meeting of the ECB’s Governing Council will be dominated by the rapid spread of the coronavirus outside China and also in Europe over the past few weeks. Some central banks have already reacted.
U.S. Treasury yields fell to record lows last week, led by shorter maturities. The yield curve steepened as a result. Plummeting yields supported positive total returns for all but the highest risk sectors. Markets now expect the Federal Reserve (Fed)
Investment Perspective February 2020: The media, and financial markets, have been consumed by the continuing spread of the coronavirus (now officially named COVID-19) and its impact on health, economic growth and financial markets. As can be seen below, financial markets
Quarterly macro and market insights Our macro outlook for 2020 is modestly constructive. Recent clarity around certain geopolitical risks has been helpful. Specifically, progress in the initial phase of a US-China trade deal and a decisive result in the December
Measured on a year-on-year percent change basis, M2 and M3 growth have both been accelerating in the US since late 2018. There are two main reasons why broad money growth acceleration has occurred, and in this article, we explain how
Points of View Equities – 2020 earnings growth estimates have held steady so far between 9–11%. This is more in line with our “Turning the Corner” scenario where economic growth improves in 2020. Risk sentiment as measured by implied volatility remains at subdued levels largely driven by global central
Northern Trust Global Asset Allocation Investment Perspective / October 2019 In addition to assessing the severity of the global economic slowdown, markets are wrestling with the U.S./China trade war, Brexit and the 2020 U.S. presidential election. The rising poll numbers
CIO | View Chart of the Week Is it still possible to earn money with Eurozone government bonds? We think so: Steep yield curves can serve as a medicine against negative interest rates. Yields on German sovereign bonds have dropped
We are pleased to welcome you to an update on: Interest Rate Benchmarks in Need of a Fix Part Two For decades the financial sector relied on the daily fixing of key interbank offered rates like Euribor, LIBOR and EONIA.
ECB Monetary Policy Events Table A.1 presents all the monetary policy events considered in our study. It shows the evolving pattern of the ECB meeting policy and the associated changes in policy communication. In this section, we point out these
Rumors of a contraction to start the year were overblown. Since March, a string of positive economic headlines have helped soothe investor sentiment and maintain economic momentum. We are still in a growth cycle with room to run.
KEY TAKEAWAYS Equity momentum is strong and volatility measures have been on the decline. However, valuations continue to look less attractive. We expect a modest rise in interest rates in the short term. Inflation-linked bonds appear to be an attractive
Interest Rate Outlook Eurozone, USA After a major shake-out in December last year, financial markets staggered rather than slid into the new year. This was caused by fears over an imminent large economic downturn. It was difficult to discern a
Occasional Paper Series Using a wide range of models we document a protracted fall in the natural (or neutral) rate of interest in advanced economies, driven by ageing, waning productivity growth, a rise in mark-ups, and a surge in risk
Interest Rate Outlook Geopolitical risks have been a permanent fixture in the financial markets for many years and markets have learned to deal with them. Really? Wasn't the success rate of the markets in properly assessing these risks rather a
Institutional investors are facing the task of navigating global central bank policy shifts and their effects. In U.S. markets, this has resulted in a flattening yield curve and heightened awareness and anticipation of a U.S. rising rate environment. Using eVestment’s
To help protect against rising rates, investors may be compelled to remove duration from their portfolios by moving to a money market fund or bank deposits, but that may not be the best strategy.
… and Other Misconceptions about Treasury Bonds In the frantic months following the fall of Lehman Brothers in 2008, the US Federal Reserve embarked on an unprecedented program of unconventional monetary policy easing. This program included purchases of mortgage-backed securities as
Emerging Debt Insights A rising global interest rate environment is once again leading to volatility in the emerging debt markets. Year-to-date through May 31, as the US Treasury 10-year yield has risen to the 3% neighborhood, the EMBIG benchmark of
Investment Highlights ̴week 24 De week begon met de grote Trump en Kim show. De historische ontmoeting tussen de presidenten van de Verenigde Staten en Noord-Korea hield vooral de gemoederen bezig in de pers en onder ‘experts’. Op de financiële
The Everything Rally
👤Northern Trust 🕔11:05, 17.Jul 2019Quarterly Market Commentary One word to describe the second quarter? Up. Rallies across global risk assets and global bond markets during the second quarter pierced some important levels, effectively erasing the 2018 drawdown completely and bringing interest rates down significantly
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