Monthly views from Insight Investment
Harvey Bradley, Co-Head of Global Rates: “Australia an outlier on implied policy rates – is it justified?”
When we look at forward pricing, Australian fixed income markets are effectively discounting a terminal policy rate of between 4.5 to 5% indefinitely, compared with closer to 3.5% in the US. That divergence looks difficult to justify. In our view, it is Australia where expectations are most stretched. Recent data points to an economy that is already softening, suggesting that current rate assumptions are unlikely to be sustained. This leaves us constructive on Australian bonds on a relative value basis.
Adam Whiteley, Head of Global Credit: “In a world of energy shocks, we back US credit”
“Looking across global credit markets, we believe Europe remains more exposed to higher energy prices than the US in our view, leaving us neutral on European credit in the near term. The longer the conflict persists, the greater the drag on European growth, increasing the likelihood that markets demand a higher risk premium should fundamentals deteriorate as we expect. This vulnerability is compounded by the ECB’s relatively narrow focus on inflation, which limits its flexibility to ease policy in the face of a combined growth and energy shock, particularly when compared with the Fed’s broader mandate.”
Francesca Fornasari, Head of Currency Solutions: “A familiar flight to safety, but not a new trend”
The US dollar rallied sharply as conflict erupted, drawing on its traditional safe haven appeal and reminding investors how quickly markets can reprice under stress. However, the move proved tellingly short lived. On approaching recent highs, the currency struggled to sustain momentum. In our view, while geopolitical shocks may trigger temporary surges, they are unlikely to reverse the broader trend which we believe is a gradual drift back toward fair value as investors diversify after years of heavy concentration in dollar assets.
Colm McDonagh, CEO, Insight Europe: “When assets start to move at the speed of markets”
The most important opportunity in digital assets isn’t about new coins or higher returns – it’s about how faster settlement reshapes the plumbing of the financial system. By placing assets and cash on chain, ownership transfer, settlement and collateralisation can increasingly happen at the same moment, rather than days apart. For fixed income investors, we believe that shift is profound. Near instant settlement reduces the need to hold idle cash, improves liquidity management and materially lowers counterparty risk, particularly during periods of market stress.
