Monthly report
Strong Fed signalling drives bull steepening
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Overview
Markets discount rapid easing by year-end, after recent Fed signalling, driving bull steepening of the curve and some dollar weakness. August’s risk-off bout is a reminder of risk asset vulnerability to weak growth and real estate particularly. Dollar weakness boosted overseas markets with credit helped by active refinancing in the risk rally.
Key highlights:
- Macro and policy backdrop – Fed appears poised to join G7 easing cycle…at last
- Yields, curves and spreads – Nominals outperform as G7 curves bull steepen
- IG credit and MBS – Higher coupons and the risk rally drive BBB outperformance
- High yield credit analysis – HY spreads recover, after brief spike
- SI sov bond analysis – ESG EMGBIC shows lower duration than non-ESG parent
- Performance – Nominal yields fall as dollar weakness boosts JGBs, gilts and Bunds
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