Global Fixed Income Bulletin
Awaiting ‘Peak’ Trade Noise
 
 

Global Fixed Income Bulletin

Awaiting ‘Peak’ Trade Noise

 

August 2018

It seems that the news cycle has been as important as fundamentals in pricing financial assets. But, there comes a time when valuations get stretched too far and even though there has not been an improvement in the news flow/fundamentals, markets can rally. July was such a month. Risky assets rallied and risk free assets sold off. However, eventually prices cannot keep going up unless fundamentals improve and/or risks decline. August is looking like a critical juncture for both trade talks and the Italian budget. In other words, volatility may return. Our current strategy is to remain somewhat cautious, do not chase higher prices (lower yields) and wait for prices to reach attractive levels. We believe both economic and technical pressures point to higher U.S. Treasury yields, though we remain of the belief 10-year maturities will struggle to sustain yields much over 3% unless the rest of the global economy improves.

 
 
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.
 
 
 

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

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