1 Jul 2013
Flash: US treasuries incur YTD losses on Fed expectations – Deutsche Bank
FXstreet.com (New York) - According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “In terms of fixed income, total returns for US Treasuries were -1.4% in June bringing its YTD losses to -2.4% as the Fed showed no desire to soften tapering expectations.”
Moreover, the US government debt has tended to set the price of debt globally so a rise in UST yields is also increasing risk premia in other markets with EM debt bearing the brunt of this. EM bonds were down around -3.8% in June after having lost -5% in May, a magnitude that the market hasn't witnessed since Sept 2011. EM bonds total returns are now around 5% down for the year.
The impact was also felt by European core rates markets although to a lesser extent with Bunds and Gilts down -1.0% and -2.4% in June. The rise in core rates also had a negative impact on DM corporate credit. Whilst moderately negative excess returns also contributed to the negative total returns, DM credit performance has been relatively resilient versus their EM peers. YTD total returns for US IG and HY corporates are currently -3.6% and +1.0%, respectively.
Moreover, the US government debt has tended to set the price of debt globally so a rise in UST yields is also increasing risk premia in other markets with EM debt bearing the brunt of this. EM bonds were down around -3.8% in June after having lost -5% in May, a magnitude that the market hasn't witnessed since Sept 2011. EM bonds total returns are now around 5% down for the year.
The impact was also felt by European core rates markets although to a lesser extent with Bunds and Gilts down -1.0% and -2.4% in June. The rise in core rates also had a negative impact on DM corporate credit. Whilst moderately negative excess returns also contributed to the negative total returns, DM credit performance has been relatively resilient versus their EM peers. YTD total returns for US IG and HY corporates are currently -3.6% and +1.0%, respectively.