In this episode of The Weekly Fix, Stephen Fitzsimmons, Institutional Portfolio Manager on the BlueBay U.S. Fixed Income Team, discusses how different data readings over the past week moved markets, as investors seek clues to future Fed moves.

In the latest episode of The Weekly Fix, hear from Andrzej Skiba, Head of BlueBay U.S. Fixed Income at RBC GAM, on why this week’s FOMC meeting will likely see the Fed on hold, and what investors can expect if the April CPI Core released mid-month lets us down again and the “higher for longer” narrative takes hold.

Corporate earnings may be in focus this week, but macro questions continue to weigh on bond markets. Tim Leary, Senior Portfolio Manager on the BlueBay U.S. Fixed Income Team, shares his insights in this episode of The Weekly Fix.

In this episode of The Weekly Fix, Stephen Fitzsimmons, BlueBay Institutional Portfolio Manager, discusses how the reality of the data shows there is no evidence that the US economy needs lower rates any time soon.

Have prospects for strong fixed income returns this year been diminished by robust U.S economic data? Listen in as Andrzej Skiba, BlueBay Head of U.S. Fixed Income, discusses why this week’s release of CPI data will give us insight into the future decision making of the Fed.

Tim Leary, Senior Portfolio Manager on the BlueBay U.S. Fixed Income team discusses how the strong but not too strong economic conditions have led to a positive environment for fixed income markets.

Key points:

• Broadly speaking, the underlying technicals are very positive for corporate credit.
• Idiosyncratic risk in a few areas of the market have generated volatility.
• We experienced a higher default rate in March, but our view is that defaults will remain benign this year & trend upward next year. 

BlueBay Institutional Portfolio Manager Stephen Fitzsimmons discusses how investors are eagerly buying up new debt issuance.  While many investors appreciated the dovish commentary last week, not all data are cooperating.  

• The past months have certainly been a sustained busy period for the new issue market.
• Strong investor demand has helped drive credit spreads tighter.
• Chairman Powell was decidedly dovish at the FOMC last week… driving yields lower.
• The economic calendar is full this week and investors markets are bracing for the latest inflation measures.

Stephen Fitzsimmons, Institutional Portfolio Manager on the BlueBay U.S. Fixed Income team discusses how investors were largely disappointed with the recent CPI reading, what we’re looking for in some key economic data releases this week, and how it might affect our positioning. 

• CPI came in hotter than market participants hoped and this drove yields higher across the US Treasury curve.
• The shape of the yield curve indicates that markets expect an economic slowdown, which is not our imminent base-case.
• Economic data in the US is doing little to show signs of slowing.
• We continue to expect that rate cuts will likely be later and potentially fewer than others may be pricing in.

BlueBay Head of US Fixed Income Andrzej Skiba discusses why investors will have to wait for additional evidence regarding a moderating inflation trend before the Fed acts to cut rates. 

• Strong growth, labor markets and inflation running hot are not a combination desired by the Fed.
• In terms of jobs, growth remained robust, but we’ve added fewer jobs than expected.
• Inflation remains sticky, with February readings staying higher, following up January’s strong data.
• We do expect a slowdown to manifest itself and that should help inflation to moderate.

BlueBay Senior Portfolio Manager Tim Leary discusses the factors that have led to higher yields this year and why we’re looking for the market to keep grinding.

Key points:

• Spreads may be tighter, but yields are higher on the year.
• This may peak investor interest and we have seen high fund flows.
• This is likely a function of the market coming back towards the Fed’s path.