Morgan Stanley IM: Lost in the Forest

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May saw global government bonds rallying for the first three weeks, followed by a slight sell off to close out an otherwise uneventful month. Japan was one of the few exceptions, as bond yields continued to rise as the need for eventual rate hikes, later in the year, became more certain. Emerging market bond yields followed pace with their developed market counterparts over the month, but lingering inflation made it difficult to outperform. The U.S. Dollar had its first down month of 2024 with the euro, pound, and other developed/emerging market currencies outpacing the clear leader of the first four months of the year. Within spread sectors, investment grade (IG) credit spreads were broadly tighter with Euro IG marginally outperforming the U.S. Within high yield, U.S. high yield spreads were wider over the month, while Euro high yield spreads tightened significantly. Securitized credit spreads continued to tighten and have been one of the best performing sectors year-to-date within the fixed income universe.

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