US

With earnings season entering full swing, David Norris highlights some indicators to look out for when assessing the current state of the US economy and the resulting actions expected from the Fed.

US banks remain bullish about the health of the consumer, but credit spreads are still pricing in not only a recession, but a fairly severe one. Are the banks wrong? Or have credit markets just backed up too far on negative fund flows?

With investors seemingly unwilling to put money to work until they see clear evidence of the inflation trend reversing, Felipe Villarroel looks at two developments that tentatively suggest central banks’ delicate balancing act is actually working.

The US high yield market has experienced the third lightest month in terms of new issue flows since the Global Financial Crisis. Chris Holman explains what this means for default rates going into the second half of the year.

At this stage in the economic cycle investors may need to think about ways to protect their portfolios while providing strong relative value. Johnathan Owen explains why short dated investment grade can offer exactly that in his latest blog.

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.

Given inflation has been running hot for more than a year now, it was no surprise to see the recent dip in US data greeted with a muted sigh of relief across the markets.

The Federal Reserve minutes for meetings held on the 3-4th May were released last night, and for markets that have been beaten up by rates volatility, they provided some interesting takeaways.

Consumers are being hit from seemingly all angles at the moment. Higher interest rates are coming, higher inflation is already hitting their pockets hard and economic growth is expected to slow.

The vast majority of the high yield universe used the attractive funding conditions last year to term out their maturity profiles. In fact, 2022 maturities in both US and European high yield equate to just 1% of their respective indices.

At the beginning of this year you would have struggled to find a single investment bank or asset manager (ourselves included) that thought owning 10-year US Treasuries (USTs) was a good idea.