Global bonds have officially erased all YTD gains
Source: Bloomberg
A 60/40 Portfolio remains 14% below its all-time high
A 60/40 Portfolio of US stocks/bonds is currently in a 14-month drawdown, 14% below its all-time high. This is the longest drawdown for a 60/40 portfolio since the financial crisis (37 months) and before that the aftermath of the dot-com bubble (43 months). Source: Charlie Bilello
The yield on German 2-year bonds reached 3% for the first time since 2008!
While yesterday the Eurozone core CPI reached a new record of 5.3%, the German 2-year bond yield reached 3% for the first time since 2008! The ECB still has a lot of work (more than currently expected?) to do in tightening monetary policy to curb inflation, especially considering the minor impact (for now) of the Fed's monetary policy tightening on US inflation and the economy. Source: Bloomberg
Second largest daily outflow for a US high yield bond ETF!
One of the largest U.S. high-yield bond ETFs had a daily outflow of $1 billion (over 10% of assets under management) yesterday. The only time we've seen it was in June 2020. Capitulation? Source: Bloomberg
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Global Bonds Are Set to Erase 2023 Gains as Pivot Hopes Wither
Source: Bloomberg
U.S. Treasury bond performance in 2023 turns negative!
For the first time in 2023, the year-to-date performance of U.S. Treasuries has turned negative (-0.14%). Yesterday, the U.S. Treasury yield curve shifted upward by about 15 basis points as the index has lost 2.6% in February so far. This sharp reversal is due to a stronger than expected resilience in the U.S. economy, which could trigger further tightening of U.S. monetary policy. Source: Bloomberg
Chinese bond outflows are back!
While sentiment is positive on Chinese assets due to hopes of the economic impact of the reopening, the inflows of CNY bonds lasted only one month. In January, capital outflows resumed due to fears of accelerating inflation in Asia and particularly in China as its economy reopens. It should be noted that the PBOC (People Bank of China) is one of the few central banks to maintain an accommodating monetary policy since the beginning of the COVID. Source: Bloomberg.
Higher yields: No material impact for Investment Grade companies?
The rising cost of financing could be a headwind for companies, but investment grade (IG) companies appear to be "immune" for the next few years. Indeed, according to Bank of America, refinancing maturing debt at the current IG yield of 5.4% would reduce the coverage ratio to about 11.5x by the year 2026, which is still above the median. Source: Bank of America.
