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
The slow-motion US banking crisis is still not out of the woods...
Indeed, US Money Market funds saw a third straight week of inflows ($29 billion this past week) to a new record high of $5.15 trillion...Retail money-market funds saw inflows for the 15th straight week (and institutional funds also saw a second straight week of inflows)... Usage of The Fed's emergency bank bailout facility rose by $606 million to a new record high at $106 billion... And as highlighted on the chart below, the decoupling between money-market fund inflows and bank deposits continues.. Could the current bloodbath in bonds be the catalyst for another round of pain? Source: www.zerohedge.com, 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
