The US Government-long group now sits atop the ACGS fixed income rankings with an average score of 3.32; at 2.51, it also has the second highest score direction of all 134 groups in the ACGS system. On the other hand, inverse fixed income now has the third-lowest score in the system and the lowest score direction at -2.70. The contrasting positions and score directions of the US Government-long and the inverse group reflect the magnitude of the recent improvement in the core US fixed income market.
The US Government-long group now sits atop the ACGS fixed income rankings with an average score of 3.32; at 2.51, it also has the second highest score direction of all 134 groups in the ACGS system. On the other hand, inverse fixed income now has the third-lowest score in the system and the lowest score direction at -2.70. The contrasting positions and score directions of the US Government-long and the inverse group reflect the magnitude of the recent improvement in the core US fixed income market.
Many core/long duration groups now have a sufficiently positive technical picture to merit consideration for inclusion in a fixed income allocation. However, much of the core market remains heavily overbought – the iShares US Core Bond ETF (AGG) has a weekly overbought/oversold (OBOS) reading of 77.5%. So those looking to add duration exposure may be best served to wait until these groups normalize on their 10-week bands.
Fed futures now pricing in a 65% chance of a 25 bps cut at the September meeting as we’ve seen expectations for a jumbo cut dwindle. The market is still pricing in 100 bps of cuts by the end of the year, implying a reduction at every remaining meeting in 2024 with one 50 bps cut.
