RESEARCH CONTENT
Following the 17month bond bear market, this report shows that the market pricing is very different to what was seen after the 2016-2018 bond bear market.
In fact, current forward markets are almost identical to the situation in Feb 07 following a 4 year bear market. This forwards remained until Jul 07, and the Fed then aggressively cut rates from Aug07 onwards.
In that Feb-Jul07 period, USTs remained in a range with negative carry.
Current expectations are understandable given the (lagging) economic indicators followed by the Fed.
This report highlights that if the past is a guide to the future, a bullish view on bonds from current levels would indicate an expectation of further equity weakness.
The conclusion shows how bonds are likely to perform in different equity scenarios, noting the recent changes to long term equity sentiment.
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