Food for thought from the Fed
The Federal Reserve minutes for meetings held on the 3-4th May were released last night, and for markets that have been beaten up by rates volatility, they provided some interesting takeaways.
Insights Topic
Monetary Policy
What has driven yields higher – rates or credit?
With investors having endured a painful period of rising yields in 2022, Mark Holman looks at whether rates weakness or credit spread widening has been most to blame.
Return of bond-equity correlations could offer respite for investors
The broad-based sell-off that has faced investors since the start of this year has been all the more painful because of the breakdown in traditional correlations, which has put conventional hiding places out of reach.
Peak hawkishness for rates, but can the consumer handle it?
Since the end of last year, central bank officials have been falling over themselves to increase their hawkishness around rates, particularly in the US. Even the ECB Governing Council members have been vocal of late.
Why inflation risks are still tilted to the upside
With inflation running at 40-year highs in many parts of the world, it is easy to get carried away with making comparisons to the dark economic days of the early 1980s.
Is a soft landing possible?
As this remarkable cycle rapidly progresses, thoughts have more recently turned to the chances of a US recession in 2023, and whether the Fed can somehow pull off a soft landing.
The evidence doesn’t point to recession
Growth in 2022 is likely to be above historical averages for most developed economies, even after adjusting forecasts for the impact of the Russian invasion.
Is there value in floating rate bonds?
Last week both the Fed and the BoE hiked rates by 0.25%, and judging by the Fed's dot plots and comments from the Bank of England (BoE), more hikes will likely follow in the coming months.
Powell confirms Fed pivot is complete
Officially the Fed pivoted from its ‘transitory’ inflation rhetoric in December last year.
BoE sounds caution on the real economy
The hawkishness of the Fed on Wednesday paved the way for the Bank of England (BoE) to follow suit.
Investors face conundrum on government bond allocations
We think a base case that central banks will follow a more measured monetary policy path than markets are currently pricing in is reasonable given the current backdrop.
Steady Fed makes short end look attractive
Escalating geopolitical tensions have contributed to a volatile past week for investors, but uncertainty regarding central bank action continues to dominate the bond markets, with one investment bank now predicting nine straight hikes from the Fed beginning at its March meeting.