Gov Sovereigns/Treasurys
This report looks at the likely path for the dollar and bond yields over the next 6-to-12 months.
The bond market priced out a lot of recession risk after this morning’s employment report, and the 10-year Treasury yield has moved back into the Soft Landing Zone. We assess the data and consider whether we need to change our cyclical positioning.
Our Portfolio Allocation Summary for October 2024.
We consider the possibility that lower interest rates could lead to an increase in household borrowing, prolonging the economic recovery.
This insight parses through the RBA’s latest policy decision, and makes recommendations on whether to expect any rate cuts in 2024, and beyond.
In this report, we argue that the Bank of Japan is unlikely to hike interest rates this week, but the relative trajectory of bond yields in Japan is higher. This warrants an underweight position in JGBs and a leveraged bet on a higher yen. The positioning for equity investors is murkier, as progress on corporate reforms is necessary for a rerating in Japanese shares. That is not yet very clear. The bottom line is: Stay long the yen.
MacroQuant continues to recommend underweighting equities and overweighting bonds. This is consistent with the Global Investment Strategy Team's decision to downgrade global equities to underweight in late June.