Questions on Inflation, Monetary Policy and Yield Curve Answered
Neither equity nor fixed income markets have escaped the wave of rising volatility this year. In the fixed income space, rising interest rates and inverted yield curves have put investors on recession alert. Below, readers can find in-depth analysis on these topics and much more, including bank reserve levels and convertible bonds.
Rising inflation and interest rates have created much uncertainty. Hedged convertible bonds offer investors a novel way to protect their capital against volatility.
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Floating-rate collateralized loan obligations can be a beneficial addition to investors' fixed income portfolios – both in terms of diversification and return generation.
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Market volatility has hit both equity and bond markets so far this year. A key driver has been the changing monetary policy regime.
Reading the yield curve, investors should expect recession to be just around the corner. Their allocations may need to shift accordingly.
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Trying to predict what the Federal Reserve may do next is impossible – especially as different economic outcomes will lead to different monetary policy scenarios.
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Some of the main questions on investors' minds right now include: What path will inflation take? Have we seen its peak or is there more to come?
Bonds are regarded as safe assets, certainly when compared to equities. However, this does not guarantee that money cannot be lost by investing in them.
Quantitative Tightening (QT) assumes that banks have ample reserves. If bank reserves decline, a more hawkish monetary policy stance may be difficult to implement.