Principal Asse… - Wed, 04/19/2023 - 11:38

Quarterly fixed income perspectives: looking ahead to 2Q 2023

Economic turning points

With the first quarter of 2023 behind us, some economic tides are starting to turn.

1. After a year of aggressive central bank tightening, the peak policy rate for the cycle is likely on the near-term horizon, which has important implications for fixed income investors.

2. Historically, a pause in the hiking cycle marks a turning point in duration, creating a tailwind for fixed income.

3. As peak policy rates come into focus, risk assets may enjoy a relief rally initially, but spreads are likely to come under renewed pressure later in the year as recession fears grow.

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