WHAT WE THINK…

 

Higher Prices, Rates and Wages…

“The rise of consumer prices and interest rates this year has been abrupt. Conventional wisdom would suggest that consumer spending will slow, and with it, North American economies. The bond market believes the slowdown will be some time next year – Fed Fund futures currently peak in March and indicate a rate decline by July. We are not so sure. We think the consumer is going to prove resilient, which will keep economies going past the end of 2023. Balance sheet improvements made during the pandemic have not been fully given back and further wage gains are likely. Stubborn inflation will necessitate that NA economies eventually slow materially, very possibly into recession. But we think that is still at least a year and a half off. In the meantime, get set for more bond market volatility and lots of false signals.”

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What We Think…Higher Prices, Rates and Wages….

 

 

Lorica Focused Fixed Income

“Bond Investors decided that the faintest indication of slowing coupled with the Fed’s ongoing commitment to rate hikes was enough information to take on duration risk. Consequently, 10-year yields fell by 36 bps to 2.65% over the month, causing the US treasury curve to invert with the 2 to 10-years yield curve now at -26 bps, as 2-year yields fell by only 7 bps. The Canadian 2-10’s curve is now at -35 basis points. The rally in the bond market resulted in large monthly gains for both the Bloomberg US Aggregate: 2.44% and the FTSE Canada Universe Bond Index: 3.90%.”

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July 2022 Commentary

 

Lorica Focused Corporate Bond

“Credit markets rallied though July despite a challenging economic outlook. Macro concerns were overshadowed by improved financing conditions, healthy corporate credit metrics, a constructive earnings season and significantly lower sovereign yields, the latter of which increased the appeal of corporate debt on a yield-carry basis. For the month, the investment grade credit curve “bull flattened”, with significant outperformance in the mid part of the curve – short, mid and long-term yields fell by 28, 60 and 48 basis points respectively. With improved sentiment, lower-rated, higher-beta debt generally outperformed across the yield curve. “

Read More →
July 2022 Commentary

  

Lorica Short Term Bond

“Bond Investors decided that the faintest indication of slowing coupled with the Fed’s ongoing commitment to rate hikes was enough information to take on duration risk. Consequently, 5-year yields fell by 36 bps to 2.68% over the month, causing the US treasury curve to invert with the 2 to 5-years yield curve now at -28 bps, as 2-year yields fell by only 7 bps. The Canadian 2-5’s curve is now at -38 basis points. The rally in the bond market resulted in large monthly gains for both the Bloomberg Short US Aggregate: 1.03% and the FTSE Canada Short-term Bond Index: 1.21%.”

Read More →
July 2022 Commentary

WHAT WE THINK…
▸2022
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
 
 
FOCUSED FIXED INCOME
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
FOCUSED CORPORATE BOND
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011

SHORT TERM

▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014

WHAT WE THINK…

 

Higher Prices, Rates and Wages…

“The rise of consumer prices and interest rates this year has been abrupt. Conventional wisdom would suggest that consumer spending will slow, and with it, North American economies. The bond market believes the slowdown will be some time next year – Fed Fund futures currently peak in March and indicate a rate decline by July. We are not so sure. We think the consumer is going to prove resilient, which will keep economies going past the end of 2023. Balance sheet improvements made during the pandemic have not been fully given back and further wage gains are likely. Stubborn inflation will necessitate that NA economies eventually slow materially, very possibly into recession. But we think that is still at least a year and a half off. In the meantime, get set for more bond market volatility and lots of false signals.”

Read More→
What We Think…Higher Prices, Rates and Wages….

 

 

Lorica Focused Fixed Income

“Bond Investors decided that the faintest indication of slowing coupled with the Fed’s ongoing commitment to rate hikes was enough information to take on duration risk. Consequently, 10-year yields fell by 36 bps to 2.65% over the month, causing the US treasury curve to invert with the 2 to 10-years yield curve now at -26 bps, as 2-year yields fell by only 7 bps. The Canadian 2-10’s curve is now at -35 basis points. The rally in the bond market resulted in large monthly gains for both the Bloomberg US Aggregate: 2.44% and the FTSE Canada Universe Bond Index: 3.90%.”

Read More→
July 2022 Commentary

 

Lorica Focused Corporate Bond

“Credit markets rallied though July despite a challenging economic outlook. Macro concerns were overshadowed by improved financing conditions, healthy corporate credit metrics, a constructive earnings season and significantly lower sovereign yields, the latter of which increased the appeal of corporate debt on a yield-carry basis. For the month, the investment grade credit curve “bull flattened”, with significant outperformance in the mid part of the curve – short, mid and long-term yields fell by 28, 60 and 48 basis points respectively. With improved sentiment, lower-rated, higher-beta debt generally outperformed across the yield curve. “

Read More →
July 2022 Commentary

  

Lorica Short Term Bond

“Bond Investors decided that the faintest indication of slowing coupled with the Fed’s ongoing commitment to rate hikes was enough information to take on duration risk. Consequently, 5-year yields fell by 36 bps to 2.68% over the month, causing the US treasury curve to invert with the 2 to 5-years yield curve now at -28 bps, as 2-year yields fell by only 7 bps. The Canadian 2-5’s curve is now at -38 basis points. The rally in the bond market resulted in large monthly gains for both the Bloomberg Short US Aggregate: 1.03% and the FTSE Canada Short-term Bond Index: 1.21%.”

Read More →
July 2022 Commentary

WHAT WE THINK…
▸2022
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
 
 
FOCUSED FIXED INCOME
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
FOCUSED CORPORATE BOND
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011

SHORT TERM

▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014