The Bond Compass will be published quarterly and uses proprietary research from State Street Global Markets’, the research and trading division of State Street. . ..
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Michael Metcalfe, Global Head of Macro strategy for State Street Global Markets
It presents a snapshot of global fixed income flows and holdings indicators from Q3 2018, derived from a sample of $10 trillion of assets, which captures more than 10 percent of the world’s outstanding fixed income holdings.
In so doing, the Bond Compass provides unique insight into how investors are positioning their portfolios based on State Street Global Markets’ global fixed income flows and holdings indicators.
The analysis shows current investor holdings in a variety of fixed income instruments and overlays buying and selling behaviours in the past quarter. These data points provide deep insight into investor sentiment and allow observers the opportunity to cut-through the noise of the market to see the reality of the investor positions beneath. The contrast between existing holdings and recent buying trends allows us to interpret investor outlook for the exposure in the future.
“The overall sense from our metrics is that despite recent volatility, investors remain cautiously optimistic about growth in the medium term,” commented Michael Metcalfe, Global Head of Macro strategy for State Street Global Markets. “Bond flows are indicating that investors view inflation as broadly benign and are not currently unduly troubled by the inflationary outlook, a trend confirmed by our online metrics through early October. What we are seeing is a re-assessment of risk and a review of holdings across the curve, but not wholesale protection purchasing. If you add to that some modest buying of credit, the flows seem to indicate that long term investors are not panicking just yet.”
“Institutional investors have been closing some of their strong underweights to the belly of the curve buying intermediate maturities,” added Antoine Lesné, head of EMEA strategy and research for SPDR ETFs. “Interestingly though we are not seeing heavy buying of inflation protection despite all the market talk of wage growth starting to threaten the pace of hikes in the US. While ‘risk off’ trades have not been running strong, what remains to be seen is whether investor’s selective ‘risk-on’ appetite remains intact into the latter half of the last quarter when allocations typically become more dynamic and market volatility more entrenched.”
State Street Global Advisors manages $336bn in fixed income strategies, managing over 30 currencies across 40 countries and 90 fixed income strategies.