FICC
| Bonds
Bond market analysis on where to position across government bonds, credit, and inflation-linked debt.
EM sovereign and corporate credit spreads are set to widen. Within a global credit portfolio, maintain a neutral allocation to EM credit markets versus US corporate credit. Favor EM local currency bonds over EM USD bonds.
The Norges Bank will cut rates only once until year-end as the NOK weakens and inflation hovers around 3%. Expect aggressive easing next year as the economic recovery is delayed by weakness in the energy sector and the labor market deteriorates.
The cost of tariffs is falling on the US consumer, not foreign exporters or US firms.
In a widely anticipated move, the RBA resumed cutting rates. However, with housing, consumption, and PMIs improving, we see little scope for the RBA to ease beyond market expectations.
This morning’s CPI report marginally tips the scales in favor of a September rate cut.
The BoE is easing, but risks falling behind. Labor and growth cracks are starting to emerge, and the Bank may soon be forced to move more decisively. This report outlines why gilts remain a buy and sterling’s path is diverging vs. USD and EUR.
Economic activity and hiring cooled significantly in the first half of the year. The most important question for investors is whether this signals an imminent increase in labor market slack.