Gaël Fichan

Head Fixed Income & Senior Portfolio Manager

What happened last week?

Central banks: What if the Federal Reserve (Fed) raised its Funds rates for the last time this cycle? Indeed, Fed Chairman Powell released the latest FOMC decisions, which raised the Federal Funds rate by 25 bps to 5% and announced that quantitative tightening would continue as planned. But the market is forcing the central bank to reconsider its position, as it expects a 100 bps cut within a year and strongly doubts a further tightening move in May. In Europe, the SNB (+50bps to 1.5%), Norges Bank (+50bps to 3.0%) and the BOE (+25bps to 4.25%) all raised their key rates, leaving the door open for further increases, convinced that their economies will avoid recession in 2023 and still concerned about inflation risks.

Rates: The yield on 10-year U.S. Treasuries ended the week almost unchanged (-3bps) to 3.38%. The front end of the yield curve fell by 7 bps, reinforcing the steepening that started at the beginning of the month. It is worth noting that we are on the verge of the largest monthly steepening of the US yield curve since October 2008! The spread between the 30-year and 5-year U.S. Treasury yields turned positive last week, while the spread between the 10-year and 2-year has increased 70 bps since its March 8 low. The MOVE index, a measure of volatility in U.S. Treasury rates, remains at a very high level, closing the week at 174 bps. In Europe, despite extreme swings (i.e., a 70bps range between the week's low and high), rates were virtually unchanged over the week. The German 2-year yield ended the week at 2.39% (unchanged) while the 10-year rose 2bps to 2.13%. Peripheral rates benefited from the weekly rise in risk assets, with the Italian 2-year yield falling 12bps, while the difference between the Italian and German 10-year yields fell 6bps to 188bps.

Credit: The risk appetite for the best quality segment of the credit market has pushed Investment Grade (IG) corporate spreads to ended the week almost 10bps lower to 149bps. This is the main explanation of another positive weekly gain (+0.9%) in IG, the fourth positive week in a row. Positive investor sentiment toward high-quality paper has revived the primary market, where more than $20 billion has been printed due to strong demand. In the high yield (HY) sector, bonds stabilized with a slight positive gain, but spreads widened slightly again during the week (+7bps). In Europe, credit indices ended the week in green, with a slight tightening of IG spreads, while high yield spreads widened slightly. But obviously the main topic was about the UBS/Credit Suisse story which saw $16bn of AT1 wiped out while the Credit Suisse equity shareholders received more than $3bn. Please find more on the topic here: .

Emerging market: Emerging market corporate bonds were slightly positive last week (+0.1%). But the deterioration continues, with credit spreads on the Bloomberg EM Corporate bonds index closing the week above 400 basis points for the first time in 2023. Investors continue to focus on high quality EM bonds, with Asian IG bonds posting its fourth consecutive weekly gain, while Asian high yield, led by Chinese real estate, continued to struggle and posted its third consecutive weekly loss. In Latin American, Credit Default Swaps (CDS) were largely unchanged, but Peruvian CDS rose 6 bps ahead of the Peruvian Congress' decision (Thursday) on whether to approve a motion to discuss the impeachment of President Boluarte.

Our view on fixed income (March):

We favor the front end of the Treasury curve, which offers decent carry and low interest rate sensitivity. The yield curve inversion and inflation plead for staying cautious on long term bonds even if they can offer an attractive hedge against potential negative scenarios.


Investment Grade

Recent developments have increased downside risks but Investment Grade continues to offer value. The risk/reward remains attractive due to the high level of carry. We were already positive on the front end of the credit yield curve, we are moving to longer investments in the 5-10 year segments. 

High Yield


High yield bonds could come under pressure in this very uncertain environment. Recession fears, expectations of higher default rates and one of the most aggressive monetary policies are expected to weigh on this segment.



Emerging market bonds have rallied impressively, outperforming investment grade US corporate bonds by more than 5% over the past six months. But rising idiosyncratic risks and the tight premium to investment grade bonds make us tactically cautious.

The Chart of the week:

The Fed Funds futures market is calling for a 100bps cut by January 2024


Source: Bloomberg

For the first time, the market is expecting a full 100 bps cut in current Fed Funds rates within 10 months! The dichotomy between the FOMC's 2023 median dots and Fed Funds futures prices is at its lowest point of the current policy tightening cycle. It is not clear that the markets are benefiting in any way!


This marketing document has been issued by Bank Syz Ltd. It is not intended for distribution to, publication, provision or use by individuals or legal entities that are citizens of or reside in a state, country or jurisdiction in which applicable laws and regulations prohibit its distribution, publication, provision or use. It is not directed to any person or entity to whom it would be illegal to send such marketing material. This document is intended for informational purposes only and should not be construed as an offer, solicitation or recommendation for the subscription, purchase, sale or safekeeping of any security or financial instrument or for the engagement in any other transaction, as the provision of any investment advice or service, or as a contractual document. Nothing in this document constitutes an investment, legal, tax or accounting advice or a representation that any investment or strategy is suitable or appropriate for an investor's particular and individual circumstances, nor does it constitute a personalized investment advice for any investor. This document reflects the information, opinions and comments of Bank Syz Ltd. as of the date of its publication, which are subject to change without notice. The opinions and comments of the authors in this document reflect their current views and may not coincide with those of other Syz Group entities or third parties, which may have reached different conclusions. The market valuations, terms and calculations contained herein are estimates only. The information provided comes from sources deemed reliable, but Bank Syz Ltd. does not guarantee its completeness, accuracy, reliability and actuality. Past performance gives no indication of nor guarantees current or future results. Bank Syz Ltd. accepts no liability for any loss arising from the use of this document.

Read More

Straight from the Desk

Syz the moment

Live feeds, charts, breaking stories, all day long.

Thinking out loud

Sign up for our weekly email highlighting the most popular posts.

Follow us

Thinking out loud

Investing with intelligence

Our latest research, commentary and market outlooks