Daily BriefsMacro

Macro: US Bonds & Asset Markets: Time for Another Rotation and more

In today’s briefing:

  • US Bonds & Asset Markets: Time for Another Rotation
  • ECB’s New Broom Throws up a Dust Cloud
  • Rates 10y Dashboard: South Africa’s Rate Curve Set to Steepen

US Bonds & Asset Markets: Time for Another Rotation

By Shyam Devani

The rally in bonds has met its targets and seems to have run its course. Now as we are at very low levels of yield again, it seems unlikely that there is much juice left in this recent trend. Instead of reversing though we believe there is a risk of continued low nominal and real yields which should provide opportunities elsewhere.


ECB’s New Broom Throws up a Dust Cloud

By Phil Rush

  • The ECB’s new strategic framework adopts a symmetrical 2% inflation target, but forward guidance remains opaque and open to interpretation.
  • The growing impact of the Delta variant plus the opaque nature of the forward guidance suggests that a September taper now looks less likely than December.
  • The ECB sees the risks associated with reducing stimuli too soon as greater than those of sustaining stimulative policy for too long.

Rates 10y Dashboard: South Africa’s Rate Curve Set to Steepen

By Gautam Jain, PhD, CFA

We expect South Africa’s rate curve to steepen as recent riots have slowed the economic recovery, likely pushing monetary tightening further out. Meanwhile, the worsening fiscal balance and outflows should pressure the long end higher. Instead of positioning for steepening now, we would wait for the curve to steepen to enter a flattener.

Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.


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