Monetary Policy
This Insight looks at the implications of the RBNZ’s rate cut on New Zealand assets.
The RBA just turned dovish, but the macro data do not justify many more cuts. We unpack why Australia’s strong labor market and sticky inflation limit the scope for further easing.
The easing bias remains, but not all central banks are equal. This Central Bank Monitor update reveals who is ready to cut more and who is still pretending not to.
This week’s report looks at Japan, with the recent BoJ meeting. While a trade war has injected uncertainty into the Japanese economy, our conviction remains high that JGBs will underperform other government bond markets, and the yen will ultimately rally. That said, JPY is due for a tactical pullback.
Bessenomics has failed so far. The key pillars of Bessent’s policy mix – achieving lower interest rates and robust economic growth – have been severely jeopardized. The US dollar has depreciated for different reasons than Bessent had envisioned and has pushed up long-term US bond yields. A trade deal between the US and China will likely come too late to preclude a major downshift in global growth.
Fed Chair Jay Powell’s remarks yesterday were in-line with our base case expectation that the Fed will not cut rates proactively in the face of rising tariff-driven inflation.
Today, we publish our Quarterly Model Bond Portfolio report. We discuss how the trade war has further increased the global recession risk, but US Treasuries could underperform their global peers in the near term. We cover the fixed income investment implications in the short run and which bond markets are poised to outperform in a severe economic downturn.
This report looks at investment implications, for Norwegian assets, given the recent meeting, from the Norges Bank.
This report is a quick take on our views on UK bonds and FX, given the recent budget.
Given the meetings between the Bank of Japan, the Bank of England, and the Swiss National Bank, our highest convictions views are:
Overweight UK Gilts. It is also time to sell sterling. We are short sterling, as of 1.30.
Underweight JGBs. Correspondingly, be long the yen.
A short CHF/JPY position remains a core holding. Selling GBP/JPY is also a great trade.