BCA Indicators/Model

Nonfinancial corporate balance sheets are generally in good shape, but there are signs of deterioration at the bottom-end of the credit spectrum. We present evidence showing that credit deterioration at the bottom-end of the credit spectrum has a habit of migrating upwards.

German Bunds have cheapened considerably, and the ECB is about to start cutting rates. Does this combination guarantee immediate profits from buying these bonds?

In this Special Report, we introduce our Euro Inflation-Linked Golden Rule – a framework to profitably trade and invest in Euro Area inflation-linked bonds versus nominals. The Rule is currently signaling that nominal government bonds should outperform inflation-linked bonds over the next year as disinflation in the Euro Area continues.

The UK labor market remains far too tight to expect wage growth to slow to levels consistent with the Bank of England inflation target. A true recession with rising unemployment is needed to finally slay the UK inflation beast. 2024 rate cuts are off the table, with the central bank having to keep monetary policy tighter for longer than markets expect and the UK economy now rebounding. We recommend downgrading UK gilts to underweight in global bond portfolios, while also looking for opportunities to buy the British pound on pullbacks versus the euro, Canadian dollar and Swedish krona.

In this report, we review what our technical indicators are telling us about the G10 currencies.