Government Bonds

“Liberation Day” has landed, and not with a whimper. In extraordinary scenes in the Rose Garden of the White House, President Trump held up a board outlining the level of tariffs the US will impose on countries around the world, and in most cases they were worse than worst-case expectations.

The relationship between government bond yields and swap rates – otherwise known as the swap spread – has been increasingly in focus, with the market’s attention turning to Europe last week as the 10-year German Bund yield traded higher than the 10-year euro swap rate for the first time ever.

Market attention in the government bond market has rapidly turned from central banks holding rates “higher for longer” to the potential for “lower and sooner".

Felipe Villarroel takes a look at how inverted government bond curves are at the moment and how previous episodes of normalisation have unwound, as curves normalised, exploring the possibilities of how the unwinding process could happen and how long it could take.

With 2023’s rally halted by the Fed’s hawkish messaging, Felipe Villarroel questions whether markets read the recent jobs data correctly and looks at what it means for terminal rate expectations.

With many market participants fearing the impact of quantitative tightening (QT), Johnathan Owen looks at one central bank’s early experience of actively selling bonds to investors.

Recent employment data suggests the US economy may escape with a soft landing, a welcome boost to market sentiment in the early days of 2023, says Eoin Walsh.

In our annual ‘Rodney Blog’, Eoin Walsh says that with rates now offering both yield and downside mitigation, and credit yields at near-decade highs, fixed income investors could enjoy strong returns in 2023

With a US inflation print finally coming in below expectations, can investors start to picture decent returns again? Or will this latest relief rally prove another false dawn?

With Rishi Sunak and Jeremy Hunt leading a more fiscally conservative UK government, Johnathan Owen checks in on sterling asset valuations and argues the UK premium is overcompensating for underlying risks.

While central banks remain committed to battling inflation with big rate hikes, George Curtis detects a clear change in tone which has seen market expectations of terminal rates tumble in recent days.

With central banks speeding through their hiking cycles, a return to rates stability (elusive thus far) could allow investors to reap the rewards of bond yields that are unusually high for this point in the cycle.