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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。

Stocks-go-up-bond-prices-go-up

Stocks go up, bond prices go...up?

Kris Xippolitos

By Kris Xippolitos

Head - Fixed Income Strategy

July 25, 2019Posted InFixed Income and Investment Strategy

When stocks go up, bond prices go down, right? While this may be what the financial textbooks tell us, stocks and bonds have chosen to disregard this historical relationship for most of 2019. Trade uncertainties and a synchronized dovish shift in central bank policies are largely responsible for the rally in global yields. We expect these themes to affect markets for some time, keeping pressure on core interest rates.

We expect the Federal Reserve to cut interest rates 25bp at their July 31 meeting. While market surprises are less frequent, the Fed has delivered dovish surprises twice as often as hawkish shocks. Beyond the July meeting, markets are still pricing in additional easing. If history is a guide, fixed income markets tend to perform well during periods of Fed easing. We remain overweight high quality US corporates and US Treasury debt (UST).

In our view, European Central Bank (ECB) policy is likely to have a more meaningful impact on global yields. We expect additional rate cuts later this year, along with a restart of their asset purchase program (APP). This is likely to weigh on net supply when 80% of the world's bond market (ex-US) already trades with a yield less than 1%. While currency strategies may offer value in certain low yielding euro bonds, we largely avoid negative yielding bonds. 

We expect ECB APP to have a positive effect on credit spreads. With potential rate cuts lowering the risk of a summer pull back, we revise up our underweights on US high yield and European corporates (both HY and IG). We remain overweight US dollar (USD) emerging market (EM) debt, which still offers some of the best relative value in global fixed income. Especially in Asian corporates, where valuations are attractive relative to developed markets. 

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