TIPS breakevens have come a long way since the pandemic, generating rockstar risk-adjusted returns. The outlook continues to look bright for inflation expectations thanks to supply chain disruptions and a likely rebound in rents.
Negative returns, but investors have ramped back up flows into investment grade corporate credit.
Large cap equities were back in vogue last week, driven by primarily higher beta sectors including energy, financials, materials, and technology. Defensive sectors including consumer staples, real estate, and utilities saw modest outflows as investors’ risk-on bias continues into May.
US 10-year TIPS breakevens have widened to fair value estimates derived from risk assets. Further upside will require rising rents and wage growth. Most importantly, rent-related searches are surging thanks to vaccines and fiscal stimulus, suggesting OER YOY will soon rebound.
Sector Performance Recap Industry Total Returns and Spread Performance Credit Market Conditions Scorecard Reported Data and Real-Time Indicators The Auto Industry Will be Challenged to Keep Up Issuance Recap View PDF View the PDF
Investors maintain strong risk-on flows led by mid and large caps of both the domestic and global variety. Nearly 88 cents of every dollar of in-flows have been directed into equities, the most since October 2018. Non-cyclicals and now thematic funds remain out of favor.