Monthly report
Treasury focus shifts to post-election policy balance
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Overview
US yields rose in October after a strong end to Q3, still confounding curve predictions of recession. Fiscal stimulus in China and the UK signals a shift away from reliance on lower rates to boost growth, driving term premia higher. Credit spreads narrowed but mainly on higher government yields, though credit quality improved. The US dollar rally resumed.
Key highlights:
- Macro and policy backdrop – Market eyes post-US election monetary/fiscal balance
- Yields, curves and spreads – G7 curves bear steepen as term premia rise
- IG credit and MBS – Credit spreads tighten, and sector betas may be changing
- High yield credit analysis – The share of Fallen Angels (FA) in HY is at a 20-year low
- SI sovereign bond analysis – Quality matters?
- Performance – Q3 rally stalls after stronger US growth – only China returns positive
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