Monthly Fixed Income Chart Pack
Senior Fixed Income Strategist
Summary: Saxo Bank is launching a monthly chart pack for the fixed income market. Our goal is to provide better visual insight over critical topics within the bond market. Enjoy!
10-year yields are still trading in a short term uptrend. If they break their upper falling trend line (red) they will find resistance at 2%.
10-year yields have been consolidating in the past few weeks, but if bullish momentum resumes, and break above 1.60% they could resume their rise towards 2%.
10 year Treasury Futures is likely find strong resistance at 133.22 (around 1.40% in yield), making a downward trend to 130 more probable.
Nominal yields are still lagging inflation expectations.
TLT ETF (iShares 20+ Year Treasury Bond ETF) continues to suffer outflows, strengthening our expectations of higher US Treasury yields.
US Corporate bonds
Lower rated corporate bonds within the investment grade and junk bond space are paying the tightest spread in nearly 15 years. CCC corporate bond spreads are about to fall to levels previously seen before the global financial crisis.
Zombies are everywhere: US Corporate risk is at the highest level in twenty years, but investors are not compensated. Average Net-debt-to-Ebitda of the S&P 500 is 2.2x, CCC US Corporate bonds offer 6.4% in YTW.
Emerging markets USD sovereign bonds
On average, Emerging markets pay a higher YTW compared to US junk bonds (4.4% versus 4.1%). Yet, their average duration is 8.5 years, more than double than the average duration in the junk bond space.
EM USD sovereign bond OAS over US Treasury is trading in the lower bound of its horizontal trending channel. However, the countries’ debt-to-GDP ratio continues to rise.
European sovereign bonds
If Ten-year Bund yields break above -0.20%, they can quickly rise to 0.15%. If they break above this support level they will find strong resistance at 0% next.
Once hedged against the euro, 10-year US Treasuries pay a yield similar to the one of 10-year Greek government debt.
Bund futures are not poised to break out bullish just yet. If they break out to the upside there is room up to 172.65. After the short-term rebound they look poised to continue lower to find resistance at 169.
European corporate Bond space
Lower rated corporate bonds within the investment grade and junk bond space are paying the tightest spread in nearly 15 years.
Zombies are everywhere: European Corporate risk is at the highest level in twenty years, but investors are not compensated for such risk. Average Net-debt-to-Ebitda of the STOXX 600 (excluding financials) is 2.45x, at the same time investors are paid the lowest YTW in history.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.