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09 January 2019
Fixed Income Weekly January 7, 2019

Market Update

2018 is behind us and a new journey is upon us. Most of 2018’s agendas should carry on with us during 2019. Politics should play a vital role in 2019, whereby investors will brace for the trade war rhetoric, the U.S. and EU internal politics, and the upcoming elections in emerging markets. Investors should also navigate through the tightening financial conditions and the heightened volatility in global financial markets. The beginning of 2019 is undoubtedly different than the start of 2018, whereby we kicked off 2018 with positive vibes and the cryptocurrency euphoria. We, however, hope that the end of 2019 would be much better than the end of 2018. Happy holidays to our investors and we wish you a great year ahead. Nevertheless, developed sovereign yields witnessed a severe swing during last week on the back of rising volatility and weak macro data. Yields, however, gained some traction on strong U.S. jobs data as well as dovish Powell. The U.S. 10 year yield started the week lower and continued its downward trend throughout the week. Interestingly, the front end of the curve, at some point, dropped below the FED’s official rate (2.25-2.50%), and it remains inverted. Germany and Japan’s government 10-year yield revisited 2017-lows. Nonetheless, the U.S., Germany and Japan’s 10-year yields closed the week lower by 5bps, 3bps, and 4bps, at 2.66%, 0.2%, and -0.04%, respectively.