Gov Sovereigns/Treasurys

We will only move to a fully defensive stance if the “whites of the recession’s eyes” appear. So far, they have not. We will be increasingly looking to our MacroQuant model for guidance on when the next turning point in markets may come.

Investors should anticipate above average Treasury returns during the next 12 months, and curve steepeners will continue to profit.

Jay Powell won’t be removed as Fed Chair before the expiry of his term next May, but we will learn the identity of his replacement this year, setting up a potentially awkward “shadow Fed Chair” situation.

We discuss the implications of this morning’s CPI report and the relative attractiveness of 2/5 Treasury curve steepeners.

Our Portfolio Allocation Summary for July 2025.

Volatility is back in UST/Bund spreads. We unpack what’s driving the moves and explain what we are watching for tactical opportunities in the UST/Bund spread.

MacroQuant’s US equity z-score is dangerously close to the -1 threshold. Moves below that threshold have reliably coincided with equity bear markets in the past. As such, MacroQuant recommends an underweight on stocks, offset by an overweight on bonds and cash.

The Treasury/OIS spread has exerted notable upward pressure on Treasury yields during the past year, but the factors driving the spread are now turning more favorable.