Global Fixed Income Strategy - April 2019

Monthly insights and updates from the Invesco Fixed Income team

May 3, 2019 | Invesco Fixed Income

Invesco Fixed Income’s latest monthly strategy outlook looks at how the US Federal Reserve’s recent communications show that it may be considering a shift to average inflation targeting. The team also introduces credit portfolio trading – a new development in fixed-income trading and how it’s changing the bond trading landscape.

The team sees that if the Fed is indeed shifting to average-inflation targeting, this could mean the Fed would move away from trying to engineer a sustained, specific inflation level and would be free to allow above-target inflation for a period before using rate hikes to slow the economy. Such a shift cold certainly change how the Fed reacts to new economic and market data. Although there are still many questions around this possible new framework, Invesco Fixed Income believes it would have positive implications for US and global macro performance and could benefit risk assets.

Turning to credit portfolio trading (CPT), the team explains that CPT is essentially the practice of trading a basket of corporate bonds simultaneously with one counterparty, either at an average basket price/yield or with a price/yield for each bond. This makes the transfer of diversified corporate bond risk quicker and more efficient than before. The team describes how Invesco applies it in trading, and how it can benefit investment teams.

To read the team’s analysis and outlook, click on “Download PDF”.

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