Inflation Protected

Our Portfolio Allocation Summary for August 2023.

This week we preview the July FOMC meeting, provide an update on the Fed’s balance sheet and recommend a new TIPS trade.

In this report, we present our performance review of the BCA Research Global Fixed Income Strategy (GFIS) model bond portfolio for the Q2/2023, and the outlook and scenario analysis for the next six months. The portfolio return exactly matched that of the benchmark index during the quarter, as modest gains on government bond allocations in the US, UK and core Europe completely offset losses on spread product underweights. Looking ahead, the portfolio is positioned to capitalize on an expected slowing of global growth over the rest of the year through an overweight stance on government bonds versus spread product and above-benchmark duration tilts in the US and core Europe.

This week we present our Portfolio Allocation Summary for July 2023.

This week we present our Portfolio Allocation Summary for June 2023.

In this report, we follow up on the upgrade to our US duration stance from last week with a review of our rates views and government bond allocations outside the US. We conclude that while we now find US Treasuries to be more attractive from a value perspective, even better value is available in euro area and UK government debt.

US bond investors should increase portfolio duration from “at benchmark” to “above benchmark” on a cyclical (6-12 month) investment horizon. We also recommend exiting Treasury curve flatteners and closing short positions in the February 2024 fed funds futures contract.

April’s CPI report was soft enough to justify a Fed pause in June. However, the overall economic data still don’t justify the magnitude of rate cuts priced into the yield curve.

This week we present our Portfolio Allocation Summary for May 2023.

Today’s releases of the March CPI and March FOMC minutes do not change our view that the Fed will deliver one more 25 basis point rate increase before going on hold.