Bond Compass: Navigating the Turbulence

Demand for US Treasuries surged to a near five-year high across Q3. Although much of the US economic data across the quarter was relatively robust, especially core inflation, broader macroeconomic weakness in light of the trade war led to the US Federal Reserve’s (Fed’s) dramatically dovish turn in rhetoric. The Fed went to some lengths to describe the change in its rate stance as a precautionary measure, but the length of the current cycle and curve inversion have markets worried about recession. Weak sentiment data at the beginning of Q4 has furthered these concerns.