Before dumping your government bonds think twice
Over the past 40 years, US treasury yields have always declined six months after the last Fed hike. Source. Edward Jones
Junk bonds are outperforming as soft landing narrative builds
High-yield has returned 6.50% this year vs 3.70% for high-grade.
Junk bonds are emerging as a sweet spot in global fixed-income markets wracked by some of the worst volatility this year, as investors increasingly bet that major economies will avoid recession for now.
Source: Bloomberg
Bonds and equities re-correlate...The recent acceleration in yields appears to have had an effect on long-duration risk-assets...
Source: Bloomberg, www.zerohedge.com
Note that US Sovereign risk (aka CDS on 1-year US Treasury) was completely unmoved by the Fitch downgrade.
Source: Bloomberg, www.zerohedge.com
Treasuries haven’t been this ineffective as a stock hedge since the 1990s. The one-month correlation between the two assets is now at its highest reading since 1996
Source: Lisa Abramowicz, Bloomberg
Who is left in the AAA club? (the US is now split-rated AA+)
Source: Jim Bianco, Bloomberg
The US bond Market has now been in a drawdown for 3 years, by far the longest in history
Source: Charlie Bilello
Banco Central do Brazil Surprises with a Larger-than-Expected Rate Cut!
Following the surprising rate cut by 100bps from Chile's Central Bank earlier this week, Banco Central do Brasil (BCB) has also made an unexpected move by announcing a rate cut of 50bps, surpassing market expectations of 25bps. The BCB President, Roberto Campos Neto, reduced the Selic to 13.25% yesterday, with a split decision among board members, four of whom voted for a smaller quarter-point cut. In a related statement, policymakers emphasized the improved consumer price outlook and the decline in longer-term inflation expectations. With Brazil's recent rating upgrade and positive progress in inflation, the country appears well-positioned to continue its path of prudent monetary policy decisions. Could we expect similar rate cuts from Peru and Mexico in the region? In any case, just as at the beginning of the tightening cycle, Latin American central banks are once again ahead of their developed counterparts. Source : Bloomberg.
