•Who scared the bond market? FED officials did! ( https://www.reuters.com/business/finance/st-louis-feds-bullard-says-fed-still-seems-behind-curve-2022-04-07/). FED is waking up from the body’s deep sleep of the last 12 months.
• Still, FED is way behind the curve (e.g., see p.8) if the objective is to control future inflation and financial risks. FED’s clear hawkish tone has taken global fixed income markets by surprise. We have revised our bond yield forecasts at p.3. Our negative DREX scores for 10Y US and EU fixed income risk (p.4) support the move.
• In our Low Risk fixed income portfolio, we keep overweight positions in EU/DK short bonds, EU IG Corporates, and US 1-3Y (USD). We remain neutrally weighted in longer duration despite a difficult investment climate for our High-Risk portfolio. We list the funds that we are currently buying on p.5
• We are not yet ready to add Fixed Income High-Quality Duration exposure. We look for 3% for up to 10Y risk. But with the pace with which global bond yields move up these days, we should prepare for the Duration trade. On p.6, we look through our options.
• On p.8-13, you find key background charts. Relevant TAD tables follow on p.15 and p.17.