Beyond the Headlines | 29 Feb 2024

Q1 Macro Roundtable: Fixed Income Opportunities | Beyond the Headlines

Javier Corominas

Director of Global Macro Strategy

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During a recent macro roundtable, Javier Corominas, Director of Global Macro Strategy, explained why his team were maintaining a heavy overweight on NZ Bonds.

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The kind of valuation gap that spread the close and therefore we’re still overweight, treasuries vs bunds. I have seen a couple other questions there on I believe on other markets. And I think that that’s interesting because in often you sort of focus on the big three or four, but you miss the key opportunities.

So our favorite let’s say bond market at the moment is New Zealand. It scores pretty highly across all the metrics that we look at. A) it’s got, you know, the highest yield at 4.85%. But also is interesting is the level of co-integration with US rates at this point if elevated rates volatility is pretty high. So you get certain regimes where let’s say Kiwi rate the Kiwi bond is like a turbocharged UST.

And so if you have a relatively benign treasury view versus another bond llike, let’s say, Bunds, then you can use New Zealand as a proxy for that. They’ve also penciled in a rate hike going forward. So that’s the only market where that that potential for disappointment is really strong. So they don’t follow through with that or at least they stay pat. Then, you know, New Zealand should outperform as well.

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Asset Management Beyond the headlines Bonds Fixed Income Markets Global kiwi bonds Macro New Zealand