Global Fixed Income Bulletin
Goldilocks Meets the Three Bears

Global Fixed Income Bulletin

Goldilocks Meets the Three Bears


April 2018

As much as January felt like Goldilocks’ conditions for markets, it seems that March was a perfect storm of risks—trade war, rising short-term rates, FANG (Facebook, Amazon, Netflix and Alphabet) stocks. Investment-grade spreads were hit especially hard in the month, widening 13 basis points and unwinding a large portion of the tightening from 2017. This was in large part driven by technical forces. Among other forces, U.S. corporate repatriation pulled dollars from abroad, pushing up funding costs and the Libor- OIS (London Interbank Offered Rate- Overnight Index Swap) spread. Yields on short-term papers widened, dragging up the rest of investment-grade spreads. We view the recent spread widening in short-dated investment-grade paper as a good opportunity to add good carry for relatively low default risk. On trade, we believe that the administration will not be singularly focused on closing the trade deficit (the bear case) and, ultimately, will be satisfied if China makes real concessions in other economic or geopolitical areas (the bull case).

The Global Fixed Income team follows a seamless process with a global outlook. They seek to identify and capture the potential value in situations where the market's implied forecasts are extreme.

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