Is the rapid increase in corporate borrowing this year a harbinger of tough times to come? The answer isn’t simple.
We are encouraged by optimism on both the medical and economic fronts. But while recent events are promising, we believe the road ahead will be a long one.
Market & Strategy Update
Central bank dovishness and good fundamentals should support spread product vs. government bonds, along with relatively volatile EM debt.
Pessimism surrounding the potential for a positive UK-EU trade deal may be unwarranted.
LIBOR, one of world's most widely used financial benchmarks, is being phased out -- but what will replace it? Western Asset examines the consequences and impact for investors.
Chart of the Week
Chart courtesy of ClearBridge Investments. * Institutional & Retail Money Funds – ICI. ** MSCI U.S. IMI Index. Data as of July 3, 2020. Source: FactSet. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment
Chart of the Week
The collapse in oil prices has added to market dislocations and uncertainty associated with the coronavirus pandemic.
Despite upward price pressures in certain industries, on balance there's doesn't appear to be sustained inflation dynamic at work.
Total durables orders jumped a whopping 11.2% in July, with a large 1.1% upward revision to the June estimate.
Weekly muni monitor
Absent improving fundamentals, we believe additional spread compression will remain paused.
July retail sales (excluding restaurants) are well above pre-COVID levels, but much of that took place online.
Proposals in two key states would change the landscape for the largest issuers and their investors.
Western Asset examines recent trends in the muni bond market and provides its outlook about conditions ahead.
Muni weekly update
Foreign demand for taxable munis is generating new issuance, and a potential benefit for spread investors.
The Fed is planning for a prolonged period of accommodation, and seeking to ensure its policies can be sustained as long as needed.
It was the most volatile first half-year in the history of the muni market, yet the Bloomberg Barclays Municipal Index still returned 2.08% for the period following a strong second quarter.
Main Street and Wall Street have divergent opinions about the Fed's longstanding 2% inflation target.
Fixed Income Markets
The recent wave of corporate bond downgrades has dropped many companies' debt into the high yield sector. But could some "fallen angels" rise again?
Muni Weekly Monitor
A deep dive into what jobs data associated with COVID-19 says about austerity at the state and local government levels.
With the Bank of England likely to keep rates very low and increase asset purchases, UK gilt yields and corporate bonds appear well supported; less so, the British pound.
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