GAA Fixed Income Track Record
We present the performance of our fixed income asset allocation, including on the slope of the yield curve, which highlights our preferences within the universe of advanced economies. Our portfolio is evaluated against widely recognised benchmarks (detailed below) to provide clients with clear, real-time insight into the effectiveness of our allocation strategies.
Our Fixed Income views are detailed in our monthly Global Asset Allocation report, available exclusively to clients of Oxford Economics.
Within our G10 rates allocation we use 7–10-year USD-hedged total return indices from BAML ICE to calculate performance. By using USD-hedged returns, rather than local currency returns, we ensure that our allocations are actionable for international investors of any base currency.
We evaluate the performance of our overweight allocations vs the comparator US Treasury index (7-10 year)
Fixed Income Curve Views Performance
For our G10 curve allocations, we measure performance by tracking the change in yield spread between the 7–10-year and 1–3-year BAML ICE indices. Curve allocations represent relative value strategies, and their performance is assessed against a zero benchmark, reflecting their market-neutral nature.
Key Fixed Income & Rates Views
- Fixed Income: Fiscal profligacy will result in steeper curves – We maintain our largest underweight in developed market (DM) government bonds in our cross-asset portfolio. We see scope for term premia to move higher as governments fail to take fiscal prudence seriously. We favour steepeners led by the long end in selected markets.
- Fixed Income: Fixed Income: Quick Take - Short-end rally in US treasuries is overdone – We disagree with market pricing which suggests that the federal funds rate will, on average, remain below 3.125%, our estimate of neutral, for at least the next decade.
- Fixed Income: Why global yield curves will steepen further – We expect a continued steepening at the long end of the curve, with a focus on 10s30s in the US.
- Fixed Income: Why Japanese investors are unlikely to return to JGBs – We don't expect the convergence in Japanese yields with global yields to result in a sudden global repatriation of funds back into Japan. Elevated Japanese government bond (JGB) market volatility, liquidity air pockets, and US Treasuries' rate advantage should keep inflows in check.
- Fixed Income: Why bond yields will rise despite a slowing economy – We see upside risks to our baseline forecast for yields and see US 10y yields reaching a 4.75%-5% range over the next few quarters.