We maintain a neutral stance on US duration. Uncertainty around the conflict, the path of oil prices, and the Fed reaction function still argue against taking a strong strategic view on nominal Treasuries. While a rapid resolution of the conflict will undoubtedly lead to a strong relief rally in Treasuries, this remains at the mercy of a US administration whose very prosecution of this war in the first place can hardly be argued was in the American self-interest. This makes the next steps the administration will take extraordinarily difficult to forecast, and sudden reversals from re-escalations remain entirely possible. Even if there is no further escalation, the longer that the status quo of little or no fossil fuel flows through the Strait of Hormuz continues, the more difficult it will be for energy markets to recover in a reasonable time-frame, given capacity constraints on production, liquification and de-liquification (for natural gas), shipping, and refining (for crude petroleum derivatives).
In short: valuations look attractive on the condition that oil prices normalise, but that signal weakens or even reverses if crude remains around current levels or rises further.
The labour market still looks broadly stable and there are no decisive recession signals yet, even if some forward-looking indicators have softened and GDP tracking has come down from earlier highs.
Inflation remains the key complication. Even before the conflict, inflation was not back at target, and the rise in oil prices raises the risk of a renewed headline shock. In that context, we continue to prefer US real rates and inflation protection over a clean long-duration call. Market pricing still shows limited willingness to price outright Fed hikes, which should keep the front end relatively range-bound in the near term.
Overall, we stay neutral on US nominal duration, positive on US real rates, and tactically alert to the risk of curve steepening should long-end term premium rise further.
After returning to a neutral stance in the days after the attacks on Iran, we re-establish an overweight euro duration position. Fair-value models suggest that German yields look rich versus the macro and oil assumptions embedded in our scenarios, and this remains true even under a higher-for-longer energy backdrop. The recent sell-off appears to have gone further than our central case would justify. The correction in longer-dated bonds has been sufficiently strong that a relief rally can offer substantial support, while at the same time we see less downside risk from these levels than in the US. An adverse energy market scenario is more likely to lead to outright demand destruction on this side of the Atlantic.
The business cycle has softened modestly and inflation risks have moved higher. This mix supports duration further out the curve, but it keeps us prudent on the front end, where the market can still reprice the ECB reaction function. We also continue to monitor the potential for a re-entry into curve steepening trades, although we are not implementing that view yet.
At the same time, we remain more cautious on non-core spreads. We closed our short in Italy, which we had initiated in the beginning of March, but we do not yet see a compelling reason to add aggressively to spread risk after the recent tightening. Relative to rates, risky assets have held up well, and Italian spreads in particular look tight versus the broader macro backdrop.
We remain constructive on Australian rates and keep Australia as one of our clearer duration convictions. While the Reserve Bank of Australia has maintained a relatively hawkish tone and inflation remains above comfort levels, we believe a large part of that is already reflected in pricing. In contrast, underlying growth dynamics look more vulnerable, and the market still appears too demanding on the policy path. This leaves room for rates to rally as investors reassess the balance between persistent inflation and a softer macro backdrop. In the current environment, Australia also offers a cleaner expression of duration than other developed markets where geopolitical and policy uncertainty remain more dominant.
We cut our long UK rates exposure in most portfolios. Our medium-term view remains that the Bank of England is unlikely to validate the amount of tightening that was priced a few weeks ago, but near-term volatility and fiscal concerns make the position less attractive than before.
The long end remains vulnerable to concerns about deficit financing, political noise, and the repricing of term premium. In that environment, we prefer to stay selective rather than press a broad long-duration view in gilts.
Emerging market assets have shown notable resilience despite higher oil prices, stronger core yields, and persistent geopolitical uncertainty. Hard currency spreads have widened only modestly, and most of the negative return has come from the move in underlying Treasury yields rather than from a sharp repricing in credit risk.
That resilience is one reason why we are becoming more constructive on EM FX. Positioning was light going into the shock, the rebound after the ceasefire was strong, and real-rate differentials remain attractive in selected markets. We continue to favour Latin America, particularly Brazil and Mexico, where carry and in particular carry-to-volatility remains compelling and external dynamics are still supportive.
By contrast, we remain more selective in hard currency debt and local rates. Spreads are not yet a clear buying opportunity, and higher energy and food prices still complicate the outlook for many local markets. Our preference within EM is therefore to express the view through currencies rather than through broad duration or credit beta.
We move to a more negative stance on the US dollar. The dollar regained some safe-haven support during the conflict, but we continue to see medium-term headwinds and think the market is increasingly ready to re-engage with the weaker-USD narrative.
Within G10, we remain constructive on the yen and we add to our positive view on the Australian dollar. We also stay negative on sterling and retain a close watch on the Swiss franc, where our short position is nearing its take-profit level. The euro has improved on positioning, but we see better risk-reward in selective pro-cyclical and commodity-linked currencies.
We remain slightly underweight investment grade in both Europe and the US, although we reduce the strength of that underweight compared with earlier in the month. Investment-grade spreads have been resilient, particularly in the US. This has been in large part thanks to technicals that remained relatively supportive. However, valuations are no longer compelling enough to justify a more constructive stance at current levels.
We keep a firmer underweight in high yield. Fundamentals continue to weaken, valuations remain expensive, and technicals are deteriorating as supply rises and investor flows soften. We also see increasing sector dispersion, with some industries facing structural pressure from changing consumer behaviour or technological disruption.
In implementation, we continue to focus on defensive sectors and stronger balance sheets. At this stage of the cycle, we prefer quality credit and we would use any meaningful spread widening as an opportunity to add selectively rather than chase tight levels.
Dieser Bereich wird jeden Monat aktualisiert und bietet Expertenanalysen und strategische Einblicke. Bleiben Sie mit unseren neuesten Marktperspektiven auf dem Laufenden.
Schnellerer Zugriff auf Informationen mit einem einzigen Klick