Weekly Fixed Income Update | Lord Abbett
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WEEKLY FIXED INCOME UPDATE

For the week of November 30, 2020

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CHART OF THE WEEK: KEY MEASURE OF INFLATION IS BELOW THE U.S. FEDERAL RESERVE’S 2% TARGET

THE WEEK IN REVIEW

With positive vaccine news a near weekly event and the U.S. election decided, markets are getting more optimistic about global economic growth, despite the lack of fiscal follow-through in the U.S. The rapid industrial recovery in China is soon to exceed the pre-shutdown trend and global trade is on a sharp rebound.

This positive news comes with little reason to worry about accelerating inflation. The U.S. Federal Reserve’s (Fed) 2% inflation target is defined with respect to the Personal Consumption Expenditures (PCE) Deflator, a measure of inflation that tracks price movements in consumer goods and services. In February 2020, just before the pandemic ended the longest expansion in U.S. economic history, inflation had reached 1.9% year-over-year. Subsequently, incorporating the shutdown period in March-April and the following recovery, inflation has fallen below the Fed’s objective (see Chart of the Week).

Measured inflation will likely continue moving lower in early 2021, however, the period that will reveal how much work the Fed has to do to get back to 2%, may come in the second half of 2021. At that time, if inflation is closer to 1% than 2%, forecasters could be forced to postpone the expected date of the Fed’s first interest rate increase to after 2023. Although some investors view these trends as a peak for asset prices, we believe improving global growth and low inflation are a favorable environment for ongoing gains.

THE WEEK AHEAD

Tuesday
Fed Chair Speech

Wednesday
Fed Chair Speech

Thursday
Jobless Claims

Friday
Employment Situation, International Trade in Goods and Services





   

Index Returns

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1 Week YTD 1-YR 3-YR 5-YR
U.S. Aggregate -0.03 7.28 7.21 5.3 4.34
IG Corporates 0.09 8.66 8.96 6.72 6.15
HY Corporates 0.66 3.99 6.19 5.27 7.46
Bank Loans 0.36 1.4 3.07 3.68 4.71
IG Corporates 1-3 Year 0.08 3.89 4.3 3.65 2.99
Global Aggregate 0.27 7.75 8.39 4.41 4.59





   
   
      
      

TREASURY RATES

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Latest 1-YR Low 1-YR High 1-WK Change YTD Change 1-YR Change
2 Year 0.15 0.11 1.67 0 -142 -147
5 Year 0.36 0.19 1.75 -1 -133 -127
10 Year 0.84 0.51 1.93 1 -108 -93
30 Year 1.57 1.12 2.39 5 -82 -62





   
   
      
      

CREDIT SPREADS

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Latest 1-YR Low 1-YR High 1-WK Change YTD Change 1-YR Change
IG Corporates 106 93 373 -4 13 1
HY Corporates 410 315 1100 -12 74 37
EM Aggregate 302 292 720 -6 1 -25
CMBS 95 64 260 -1 23 25
MBS 50 28 115 0 11 4
ABS 37 27 325 1 -7 0





   
      
      

OTHER INDICATORS

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Latest 1-WK Change YTD Change 1-YR Change
S&P GSCI 388.06 14.20 -48.16 -32.28
Crude Oil - WTI ($) 45.51 3.36 -15.55 -12.60
Trade Weighted Dollar* 128.01 0.00 -0.60 -1.78
5-Yr Breakeven Inflation Rate (%) 1.68 0.06 -0.02 0.13

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