Government Bonds

With Fed rate hikes continuing and the economy progressing into late cycle stages, Mark Holman presents his expectations from the Fed going into the second half of the year and explains why he believes Treasuries can provide the protection investors may need.

For all of these observations, there is one common observation – yields did not stay at these high levels for very long.

The broad-based sell-off that has faced investors since the start of this year has been all the more painful because of the breakdown in traditional correlations, which has put conventional hiding places out of reach.

Since the end of last year, central bank officials have been falling over themselves to increase their hawkishness around rates, particularly in the US. Even the ECB Governing Council members have been vocal of late.

TwentyFour Partner and Portfolio Manager, Eoin Walsh, discusses market conditions in Q1 2022 and provides his outlook for the year ahead.

With inflation running at 40-year highs in many parts of the world, it is easy to get carried away with making comparisons to the dark economic days of the early 1980s. 

As this remarkable cycle rapidly progresses, thoughts have more recently turned to the chances of a US recession in 2023, and whether the Fed can somehow pull off a soft landing.

Officially the Fed pivoted from its ‘transitory’ inflation rhetoric in December last year.

The much-anticipated March FOMC meeting is finally upon us, and given there was no meeting in February investors will be very glad of this window into the Fed’s thinking, particularly given the ongoing and far-reaching economic ramifications of Russia’s invasion of Ukraine.

We think a base case that central banks will follow a more measured monetary policy path than markets are currently pricing in is reasonable given the current backdrop.

Global bond markets have moved sharply in the wake of Russia’s invasion of Ukraine as investors have tried to assess the impact of an unprecedented raft of financial and economic sanctions. Mark Holman looks at the potential implications for inflation and growth, and highlights some areas of fixed income where yields have risen to near-crisis levels.

Escalating geopolitical tensions have contributed to a volatile past week for investors, but uncertainty regarding central bank action continues to dominate the bond markets, with one investment bank now predicting nine straight hikes from the Fed beginning at its March meeting.