UBS maintains an 'Attractive' view on high grade bonds, arguing that current market pricing for interest rate hikes is excessive and that yields at the 5-year tenor offer compelling risk-reward as inflation risks from the Middle East eventually normalize.
Key Takeaways
- 1.UBS maintains an Attractive rating on high grade bonds (rated AA- or better) due to low default risk and an appealing risk-return profile.
- 2.Market pricing of future interest rates for the Fed, ECB, and BoE is considered excessive and likely to be reversed as energy prices normalize.
- 3.Bond valuations are currently at the cheap end of multi-decade ranges, supporting positive total return expectations for long-term investors.
Table of Contents
- USD
- EUR and CHF
- GBP
- Upside scenario
- Downside scenario
- Global asset class preferences definitions
- Appendix
- Risk Information
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Authors
Tom NashFrederick Mellors
Securities
10-year US Treasury10-Year German BundCrude Oil FuturesCHF
Themes
Geopolitical Energy ShocksCentral Bank Credibility and Re-pricing
Regions
North AmericaEuropeUKUnited StatesGermanySwitzerland