February 10, 2023

Fixed Income Insights - February 2023

Monthly Report

Fed caution on inflation, but Treasuries front-run easing, leaving tail risks?

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Fed concerns about inflation persisting above target were evident at the February FOMC. The big rally and bull inversion of the Treasury curve has parallels with 2018/19, but is at risk if the labor market tightens again. Short-dated credit remains in a sweet spot, helped by evidence of a soft landing and low default rates.

Key highlights:

  • Growth & inflation expectations – US soft landing remains intact, but European inflation is sticky
  • Yields, curves and spreads – The disconnect between cautious central banks and market optimism on rates widened
  • Performance – Duration became the investor’s friend in the January rally, but 12M returns remain deeply negative
  • Sovereign and climate bonds – Swings in relative performance in 2022/23 were led by duration and country weights

These reports provide actionable insights on global fixed income markets. They cover shifts in global yield curves and credit spreads, across sovereign, inflation-linked and corporate indices, and FX-adjusted return performance using proprietary month-end data from our global fixed income indices. 

For specialist content on a range of investment topics, including macroeconomic analysis and how it affects market performance and multi-asset analysis, viewed through our indices and data, explore our Global Investment Research hub.

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