Partner, Head of Fixed Income
Once again, volatility has gripped financial markets. Over the last decade, investors have become used to such events, for good or bad. Within the fixed-income markets, there are certain indicators we can look to in an attempt to define the severity of the current upheaval, the most popular being Treasury yields.
Treasury yields across the maturity spectrum have declined, with the 2-year Treasury at five-month lows and the 10-year Treasury yield at three-month lows as a result of a flight to quality. This is typical during periods of uncertainty as investors prefer the safety of U.S. Treasuries.
The first iteration of our “Recession Tracker” chart linked here and pictured below highlights nine indicators we are monitoring within fixed-income markets. While the bulk of the data does not suggest a significant increase in risk, we do expect the elevated level of volatility to remain for some time.
Within our fixed-income strategy, we are taking the opportunity to add to high-quality, longer-maturity bonds. Should the current dislocation continue, then these bonds could outperform other asset classes owing to their higher yield. If conditions deteriorate further, then the potential outperformance of these bonds could act as "insurance" for a balanced portfolio.
We will continue to monitor market signals and take action accordingly. As always, we are here for you. Please reach out to your Fidelis Capital team with any questions.
