American returns remain at the center of the attention of investors, with the Treasury at ten years of age at 4.2% after a descent of about 10 basis points in the last week.
According to Mauro Valle, Head of Fixed Income of Generali Asset Management, the US macroeconomic data of August showed an improvement, but the focus of the markets remains focused on the labor market, in particular on the non -Farm payrolls expected in the next few days. The Consensus provides for a limited creation of about 78,000 new places and an uphill unemployment rate at 4.3%. Core PCE inflation accelerated from 2.8%to 2.9%, driven by a rebound of goods, while the services remain stable at +3.5%. Despite the price dynamics, the market is now almost completely a cut of Fed rates in September, with a second intervention expected in December. In this context, Generali AM maintains a neutral position on US rates, with a preference for an increase in the slope of the curve.
The situation in Europe
On the European front, the picture appears more stable. Bund oscillate between 2.7% and 2.8%, supported by favorable macro data and by an inflation that should be attested just above 2% in the coming months. The manufacturing PMI index of the Eurozone has returned to the territory of expansion at 50.7, with solid performances in Italy, France and above all Spain. Core inflation remains to 2.2%, reducing the chances of a cut of rates by the ECB in the short term. Valle stresses that, in a scenario of economic trusted confidence, bund yields could remain within a small range, but with growing risk of a return towards 3%.
The French situation
French political tensions contributed to widening sovereign spreads. After the request for vote of trust of Prime Minister Bayrou, the Oat-Bund spread has reached 79 basis points, with effects also on the BTPs, which arrived at 86 Valle observes that, if the BTPs exceed 90 basis points, the space could open for an increase in allocation. In the meantime, the overall duration of the wallet has been reported on neutral levels, with a more defensive attitude on long deadlines and a preference for the intermediate section of the curve.
The bond portfolio
On credit, Generali AM analysis highlights solids and resilient spreads during the summer, thanks to a low offer and assessments still favorable for the investment-grade segment compared to the high-yield. The company’s bond portfolio remains concentrated for over 50% on Corporate IG titles, with a reduced share, equal to 6.7%, of high performance bonds. AT1 bank hybrid tools continue to offer an interesting risk-reception profile, resulting more attractive than BB rating bonds.
