What’s been puzzling is not necessarily that risk assets have been buoyant, but rather the strength in US equities has been led by so-called “duration proxies” despite the renewed weakness in bonds. Of the past 12 monthly jobs reports, 11 payroll prints have beaten the median estimate. Perhaps there’s been no better illustration of this than US non-farm payrolls, which once again exceeded expectations on Friday night. Bond yields have generally risen (US 10y +35bps since the May FOMC) as terminal rate pricing has been re-calibrated higher amid the persistent resilience of the hard data, particularly on the labour front and fears over the banking sector now in the rear view mirror. While the market might be positioned for a US recession, it’s arguably now priced for a soft landing. As US inflation fears continue to recede and leading indicators of activity point towards elevated recession risk, price action across assets classes might seem a bit surprising. With just over a week to go until the June FOMC and Fed officials now in their blackout period for making public comments, the global macro backdrop has taken yet another intriguing turn. This information is for wholesale client use only.Ĭommentary from the Betashares portfolio management desk by head of fixed income Chamath De Silva, providing an overview on fixed income markets.
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