- •Clients have the late cycle blues. Us too.
- •But we disagree with consensus on a few things: the Fed…
- •…and the dollar…
- •…and investors are now more bullish on EM. We are not.
- •Raw data
- •Raw data
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- •Raw data
- •Analyst Certifications and Important Disclosures
- •Important Disclosures Continued
- •Disclaimer
- •Disclaimer (continued)
vk.com/id446425943
Raw data
Credit
In 2019, what is the key risk to US HY performance? |
|
In 2019, what is the key risk to European HY performance? |
|
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|
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Q4 2018 Q3 2018
Weaker |
Pickup in fallen |
Worsening |
Tightening central |
Higher risk-free |
international |
angel volumes |
corporate |
bank policy |
yields |
demand |
|
fundamentals |
|
|
50% |
45% |
40% |
35% |
30% |
25% |
20% |
15% |
10% |
5% |
0% |
Weaker |
Pickup in fallen |
Worsening |
Tightening central |
Higher risk-free |
international |
angel volumes |
corporate |
bank policy |
yields |
demand |
|
fundamentals |
|
|
In 2019, I expect investment grade credit spreads to be
80% |
70% |
60% |
50% |
40% |
30% |
20% |
10% |
0% |
Wider than current |
Wider than current |
Tighter than current |
Tighter than current |
spreads in both the US |
spreads in the US, |
spreads in the US, wider spreads in both the US |
|
and Europe |
tighter in Europe |
in Europe |
and Europe |
In 2019, I expect high yield total returns to be
50% |
45% |
40% |
35% |
30% |
25% |
20% |
15% |
10% |
5% |
0% |
Higher than current |
Higher than current |
Lower than current |
Lower than current |
yield in both the US |
yield in the US, lower in |
yield in the US, higher |
yield in both the US |
and Europe |
Europe |
in Europe |
and Europe |
Restricted - External
14 |
December 14, 2018 |
vk.com/id446425943
Raw data
Interest rates
At what level do you expect the fed funds rate to peak in the current hiking cycle in the US (upper end of the range)?
By when do you think the hiking cycle in the US will be over?
45%
Q4 2018 Q3 2018
40%
35%
30%
25%
20%
15%
10%
5%
0%
2.50% |
2.75% |
3.00% |
3.25% |
3.5% or higher |
At what level of reserve balances (current $1.8trn) do you expect the Fed to stop the balance sheet run-off?
40% |
|
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|
35% |
|
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|
30% |
|
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25% |
|
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20% |
|
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|
15% |
|
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10% |
|
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5% |
|
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|
0% |
|
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|
|
Above $1.5trn |
$1.25-1.5trn |
$1-1.25trn |
$0.75-1.0trn |
Below $0.75trn |
30% |
|
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25% |
|
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20% |
|
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|
15% |
|
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10% |
|
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5% |
|
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0% |
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Q2 19 or sooner |
Q3 19 |
Q4 19 |
Q1 20 |
Q2 20 or later |
Where do you expect 10y UST yields to be at the end of Q1 19 (currently 3.1%)?
50% |
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|
|
45% |
|
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|
|
40% |
|
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35% |
|
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30% |
|
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25% |
|
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20% |
|
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15% |
|
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10% |
|
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5% |
|
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0% |
|
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|
|
Less than 2.75% |
2.75 - 3.0% |
3.0 - 3.25% |
3.25 - 3.5% |
Above 3.5% |
Restricted - External
15 |
December 14, 2018 |
vk.com/id446425943
Raw data
Interest rates
By when do you expect the 2s10s Treasury yield curve to flatten to 0bp (currently ~25bp)?
Where do you expect the policy rates in the UK to be at the end of 2019 (current policy rate = 0.75%)
30% |
|
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|
|
25% |
|
|
|
|
20% |
|
|
|
|
15% |
|
|
|
|
10% |
|
|
|
|
5% |
|
|
|
|
0% |
|
|
|
|
Q4 18 |
Q1 19 |
Q2 19 |
Q3 19 |
Q4 19 or later |
By when do you expect the ECB take the depo rate to 0bp (currently -40bp)?
40% |
|
|
|
35% |
|
|
|
30% |
|
|
|
25% |
|
|
|
20% |
|
|
|
15% |
|
|
|
10% |
|
|
|
5% |
|
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|
0% |
|
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|
0.5% or below |
0.75% |
1.00% |
1.25% or higher |
Where do you expect the deposit rate to be at the end of the ECB hiking cycle?
|
40% |
|
|
|
|
|
Q4 2018 |
Q3 2018 |
|
|
60% |
|
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Q4 2018 |
Q3 2018 |
|
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35% |
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50% |
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30% |
|
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40% |
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25% |
|
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|
|
|
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30% |
|
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20% |
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15% |
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20% |
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10% |
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10% |
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5% |
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0% |
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The ECB will not be |
0.5-1% |
1-1.5% |
|
Higher than 1.5% |
||||
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0% |
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able to hike beyond |
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H1 2020 |
Sep-2020 |
Dec-2020 |
|
Sometime in 2021 |
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0.5% in this cycle |
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Restricted - External
16 |
December 14, 2018 |
vk.com/id446425943
Raw data
Interest rates
Where do you see 10y Bund yields by the end of Q1 (current level = 0.36%)?
Where do you expect 10y Italian spreads to be by the end of Q1 (currently c.300bp)?
50% |
|
|
|
|
45% |
|
|
|
|
40% |
|
|
|
|
35% |
|
|
|
|
30% |
|
|
|
|
25% |
|
|
|
|
20% |
|
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|
|
15% |
|
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|
|
10% |
|
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|
5% |
|
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|
0% |
|
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|
|
0.00 – 0.25% |
0.25 – 0.50% |
0.50 – 0.75% |
0.75 – 1.00% |
Above 1.00% |
35% |
|
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|
|
30% |
|
|
|
|
25% |
|
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|
|
20% |
|
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15% |
|
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|
10% |
|
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5% |
|
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0% |
|
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|
Below 200bp |
200-250bp |
250-300bp |
300-350bp |
Higher than |
|
|
|
|
350bp |
Restricted - External
17 |
December 14, 2018 |