In this week’s Market Pulse, Research Analyst Niamh O’Leary discusses the ongoing fixed income market developments and how we have used the turbulence to alter our mix.
- The tussle in the fixed income markets continued last week, but it remains orderly. There were bond auctions in the US which probably added some pressure. We are getting the same picture painted by events last week. We have a stronger global economy that is raising inflation concerns but central banks remain passive feeling these inflationary pressures are transitory. Nothing has come along to change the longer-term view of inflation.
- The policy background remains constant. The outcome of the ECB Council Meeting was benign. It sees no change to the medium-term outlook for any inflation and it will look through any acceleration that may happen in 2021.
- We have used the turbulence in the bond markets to alter our mix. The focus has been on the geographic mix rather than sectoral. The US Euro spread has been steadily widening and is now attractive enough to switch some exposure. It is providing an opportunity for us to give our clients a positive return on some of their safe haven assets. If it widens further, we will do more.
- In the equity mix we are looking at the nature of our cyclical exposure, not the level of it, just how early cycle do want to be. We are one year into the recovery now.
