Multi-Asset Essentials

US Treasury spreads looking extended

This week’s focus is on relative plays across government bonds, US credit & FX. In bonds, UST 10Y yields are stretched vs. many others including Bunds, according to our SBIs*. Leading indicators caution against extrapolating some recent trends.

Duration dominating credit risk

In credit, US High Yield returns hit ‘stretched optimism’ vs. Investment Grade on the same macro data mix that’s allowed equities to beat long UST with both down. Still waiting for sub-trend nominal growth that could pose more problems for HY.

CNY/JPY and AUD/NZD reach ‘stretched optimism’ zone

In FX, CNY/JPY is extended in SBI terms. We wouldn’t chase the rally as it’s not backed by real yield trends or policy biases. First ‘overbought’ SBI signal for 18m in AUD/NZD, where range-trading history has often favoured mean-reversion plays.