Maxis Investments Fixed Income Monitor
Data showed last week that US data is on the strong footing where it left in 2017, as the CPI data slightly beat market expectations. The Treasuries yield curve shifted upwards by around 4-5bps across different maturities. After nearing very close to 2.60% level, the 10 year yield closed the week at 2.55%, around 7bps higher on a weekly basis. Today the US markets are closed due to the Martin Luther King day, and trading will resume tomorrow.
Gilts and Bunds underperformed their American counterpart. Gilts curve bear flattened as medium term rates rose by around 10bps, whereas long term rates rose by around 5bps. 10 year yield closed the week 10bps higher at 1.34%, mainly due to headlines suggesting that Netherlands and Spain could be closer to a soft Brexit notion. Bunds bear flattened as well, with the belly of the curve underperforming the Gilts. Medium term rates rose by around 15bps, whereas longer term rates rose only by around 5bps. 10 year yield closed the week at 0.58%, around 14bps higher. After the latest ECB minutes markets are focusing on whether ECB would end QE in September and if so whether there would be any rate hikes to follow afterwards.
EM sovereigns moved mostly in line with the Treasuries, as the JPMX EMBI Global Sovereign Index – Treasury spread moved sideways at 300bps. Turkish sovereigns have underperformed both the Treasuries and the EM index as the curve shifted upwards by around 10-14bps. The sovereign issued a new 10 year USD denominated Eurobond worth USD 2bio at 5.20%. Recent headlines regarding the rising tensions in the Syrian border put pressure on the lira, but have so far made a muted impact on the sovereigns. We remain cautious on duration and selective on higher rated credits.