top of page
  • Writer's pictureEdward Ballsdon

Market Observations - Simple correction or more?

REPORT CONTENT


This note examines recent extreme bond moves, trying to assess whether it is something new or just a correction offering an opportunity to enter at more favourable levels. In summary:


The Gilt 5yr 24bp yield increase was an extremely rare event.

However, >15bp (+/-) changes have become a more frequent occurrence.

Globally, December inflation data did not suggest a change to the disinflationary trends in place.

Economic surprise indices across many countries are unusually all close to 0

The breakdown in fixed income market structure witnessed in Oct23 has not repeated itself in the current yield correction, but there is a risk it does if yields increase further or range trade

In such a scenario, the correlations between fixed income/equity/credit/USD seen in Nov-Dec23 would reverse (as they have this week)

Commodities continue to trade weak, despite the growing issues in the Middle East


This suggests that there has been only a Central Bank market correction. The risk, though, is that if Central Bankers continue to push back and keep rates on hold too long, thereby reducing the demand for bonds, that fixed income internals deteriorate and cause a revaluation of risk assets.

Recent Posts

See All

Curve trades?

This note discusses why curve trades have been avoided until now, and how market momentum and economic data have recently changed opening up opportunities for new curve trades. There is also an analys

UK "Poisoned Chalice"

Following last week’s piece showing how global macro trends are leading to big political changes (Boiling Frog), this note looks at the UK macro environment. The newly elected Labour Party, which achi

Updated investment themes

Report updating exisiting macro investment themes, including: Global bank equity indices and bank senior and sub credit indices, and how they react in rate cut cycles Global real yield relative value

Comments


bottom of page