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Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Fixed-income-assessing-the-damage-and-the-opportunity

Perspectives

Fixed income: Assessing the damage, and the opportunity

Kris Xippolitos

By Kris Xippolitos

Head - Fixed Income Strategy

May 5, 2020Posted InInvestment Strategy and Fixed Income

As the smoke from last month’s fire sale clears, bond markets are left with lower risk-free rates and wider credit spreads. In certain higher-risk assets, valuations are downright cheap. However, we express some caution as the public and personal impact surrounding the Covid-19 pandemic has likely translated into one of the deepest economic contractions in modern times. We remain focused on keeping portfolio quality high and preparing for what could be a volatile time ahead.

We expect the US Federal Reserve to keep policy rates at the zero bound for the foreseeable future. Futures markets currently imply a mere 15bp worth of rate hikes through 1Q 2023. It’s unlikely we see the Fed raise rates before the unemployment rate drops dramatically. This could take a couple of years at a minimum. Long-term rates may eventually come under pressure as virus fears abate and Fed purchases slow. With short rates anchored, the yield curve is more likely to steepen.

The severe dislocation that credit markets endured last month has largely been resolved. With the low hanging fruit now gone, investors are still left with cheap valuations. Though secondary market liquidity has improved, it’s far from normal. New issuance has become an easier venue to source bonds, with corporations taking advantage at a record-breaking pace. In many instances, lower Treasury yields has resulted in attractive “all-in” financing for issuers, despite wider spreads.

We maintain our high conviction in US investment grade (IG) corporates. At the same time, rate differentials between the US and Europe have narrowed significantly, increasing the value proposition for non-US bonds. We stay neutral high yield for now, though history does suggest a long-term opportunity is present. However, this may be more so in bonds than HY bank loans. For US investors, municipals remain cheap across the entire curve.

Read Bond Market Monthly.