Fixed Income
In this report, we argue that the Bank of Japan is unlikely to hike interest rates this week, but the relative trajectory of bond yields in Japan is higher. This warrants an underweight position in JGBs and a leveraged bet on a higher yen. The positioning for equity investors is murkier, as progress on corporate reforms is necessary for a rerating in Japanese shares. That is not yet very clear. The bottom line is: Stay long the yen.
We update our bond views following today’s 50 bps rate cut.
UK headline CPI grew at a stable 2.2% y/y in August, though the core measure accelerated from 3.3% to 3.6%, in line with expectations. An 11.6% annual increase in airfare largely drove core CPI higher, while offsetting contributions from food and alcohol led…
The Fed started its easing cycle with a bang, cutting the policy rate by 50 basis points in September, above consensus expectations but in line with odds embedded in the futures and OIS curves. Our US Bond strategists had highlighted it is unusual for the…
Stress among lower-income households is often cited as an early indication of deteriorating aggregate consumer fundamentals. The data indeed suggests that this cohort’s cash holdings are depleting. However, the Fed’s quarterly estimates of household wealth…
Canadian headline CPI inflation decelerated at a faster-than-anticipated pace from 2.5% y/y to 2.0% in August, the slowest since 2021. Notably, core median and trimmed-mean CPI ticked 0.1 ppt and 0.3 ppt lower to 2.3% and 2.4%, respectively. Lower oil…
According to BCA Research’s Global Asset Allocation Strategy service, a common objection to buying Bitcoin raised by traditional investors is that it is too volatile. In the past it has been argued that this is irrelevant, however, this also turns out to be…
We noted earlier this month that the Fed would be unlikely to deliver a jumbo rate cut without telegraphing it first. President Williams' and Governor Waller’s September 6 speeches offered policymakers one last chance to do so before the customary pre-FOMC…
According to BCA Research’s Global Investment Strategy service, the imbalances in the US economy are sizeable enough to generate a mild recession. Unfortunately for equity investors, a mild recession would not preclude a deep correction in stocks. …
Continued deterioration in labor demand underpins our expectation for a US recession, as it will lead to slower compensation growth, hobbling consumption spending’s main driver. We also previously highlighted that the outlook for bond yields currently hinges…