01 Jun Fixed Income Perspectives – ‘What Does a Yellow Light Mean?’
Posted at 11:19h
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Voya Investment Management – Fixed Income Perspectives – May 2016
The combination of dovish Fed rhetoric and Chinese monetary expansion have pushed asset prices higher in recent months. While there exists an obvious risk that either of these two drivers could change gear, we find it unlikely that the Fed will grow hawkish given the sluggish economic pace at home. That leaves China as the primary risk to the rally, and statements out of Beijing suggest an easing of stimilus is a real possibility; meanwhile, a decline in the value of the renminbi could trigger another round of capital outflows. In this environment, we favor building in yield with U.S.-centric spread assets like CMBS and corporate bonds.