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FOMC: The Doves are Back and The Dots are Square

Federal Reserve Reaffirms Dovish Stance Via Significant Amendments

Alongside the conclusion of the Federal Reserve's March FOMC meeting, we thought it would be a good time for another fixed income update.   The U.S. Fed Funds rate is to be held steady, and the remainder of announcements (including a new dot plot, an update on the balance sheet runoff, and the Fed's official statement) all served to solidify the Fed's dovish pivot in January.  Most notably, expectations are for slightly slower U.S. GDP growth in 2019, and no rate hikes for the rest of the year. 

But, seeing as U.S. monetary policy is not the sole driver of global fixed income markets, we've listed several other papers on the outlook for global fixed income, the ECB and European debt markets, EMD, and the forthcoming transition away from LIBOR.  

FOMC dot plot

2019 Global Fixed Income Study (Invesco, Mar 2019)

For compliance reasons, this paper is only accessible in certain geographies

For their second Global Fixed Income Study, Invesco interviewed 145 fixed income specialists at pension funds, insurers, sovereign wealth funds, and other investment firms. Representative AUM for the survey respondents amounts to over USD 14 trillion.

2019 Global Fixed Income Study (Invesco, Mar 2019)

For compliance reasons, this paper is only accessible in the United States and Canada

For their second Global Fixed Income Study, Invesco interviewed 145 fixed income specialists at pension funds, insurers, sovereign wealth funds, and other investment firms. Representative AUM for the survey respondents amounts to over USD 14 trillion.


Squaring the Dots


The Fed's message is solidly dovish; for now (Fidelity Intl, Mar 2019)

For compliance reasons, this paper is only accessible in the UK & Europe

The Fed stuck to its guns (in terms of the dovish message they previously conveyed this January), but it may leave itself with less room for manoeuvring.

Fed Thoughts: Follow the Money (Mellon Capital, Mar 2019)

In this brief note, Mellon Capital Chief Economist Vincent Reinhart discusses the Fed's current emphasis on its balance sheet.

The Fed's Challenge of Squaring the Dots (PGIM Fixed Income, Mar 2019)

For compliance reasons, this paper is only accessible in the United States

The Federal Reserve's change of stance in January helped to bring stability to financial markets. PGIM Fixed Income examines the precursors to this decision, as well as upcoming tasks ahead for the Fed.

Jerome Powell, Central Banker to the World (Pictet WM, Mar 2019)

Pictet Wealth Management describes the Fed's dovish pivot in detail, as well as the market expectations for US interest rates and their own expectations for the March FOMC meeting.


Fixed Income Outlook


Monthly Market Monitor (Eaton Vance, Mar 2019)

For compliance reasons, this paper is only accessible in the United States and Canada

The very first section of Eaton Vance's Monthly Market Monitor is a 12-page chartbook covering global fixed income markets.

Monthly Market Monitor (Eaton Vance, Mar 2019)

For compliance reasons, this paper is NOT accessible in the United States and Canada

The very first section of Eaton Vance's Monthly Market Monitor is a 12-page chartbook covering global fixed income markets.

Fixed Income Asset Allocation Insights: Nimble Portfolio Positioning (PineBridge, Mar 2019)

PineBridge presents their montly assessments of cross-sector fixed income views, emphasizing the need for nimble positioning.


ECB and European Debt


ECB Monetary Policy Confronts Aging Demographics and Elusive Inflation (PIMCO, Mar 2019)

Is Europe easing its way into a liquidity trap? PIMCO looks at European demographics and its links to inflation expectations, as well as whether the ECB is likely to achieve its inflation target.

ECB support reveals much about Europe's lenders (Aviva Investors blog, Mar 2019)

For compliance reasons, this paper is only accessible in certain geographies

How healthy are European banks, and what lessons can be drawn from the return of cheap loans to the ECB's toolkit?

European Distressed Debt Market Outlook 2019 (Debtwire)

This Debtwire 2019 European Distressed Debt Outlook discusses why the tide may finally be turning for the distressed debt market.


Emerging Markets Debt


Demystifying China's Domestic Debt Market (S&P Global Ratings blog, Feb 2019)

In this blog article, the Capital IQ division of S&P Global Ratings attempts to demystify some of the risks and opportunities within the Chinese domestic debt market.

Emerging Markets Charts & Views: H1 2019 (Amundi AM)

Emerging markets (EM) started 2019 on a strong footing and, as a result, some excessive valuation gaps have been partially closed. Yet, we continue to see opportunities in all EM segments (equity, bonds in hard currency and in local currency) with a medium to long-term view. In the short term, we anticipate phases of volatility as geopolitical uncertainty remains high (especially on trade negotiations) and China is engineering a soft landing of its economy. Against this backdrop, we believe investors could seek entry points in periods of volatility to further add into EM assets.


The LIBOR Transition


The LIBOR Transition (PGIM Fixed Income, Mar 2019)

For compliance reasons, this paper is only accessible in the United States

PGIM Fixed Income discusses SOFR and whether it is an adequate LIBOR replacement, as well as future milestones in the transition away from the LIBOR benchmark.

Beyond LIBOR: a primer in the new reference rates (BIS, 2019)

Who better to provide a comprehensive overview of LIBOR replacements than the BIS? They discuss the shift from IBORs to overnight risk-free rates, and the implications of this transition for banks and for global markets.

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