EMB - U.S. cash outperforms all major global fixed income assets

2023-10-19 11:31:45 ET

U.S. cash has outperformed all the main global fixed income assets, after this week’s bond sell-off, according to data from Deutsche Bank and Bloomberg Finance.

The Nasdaq ( COMP.IND ) has performed at 28% return, followed by the FTSE MIB Index ( FTSEMIB ) at 22%, the S&P 500 ( SPY ) at 14%, the US WTI Crude Oil Futures ( CL1:COM ) at 10%, the Nikkei ( NKY:IND ) at 9%, Gold ( GLD ) at 7%, DAX ( DAX:IND ) at 7%, Brent Futures ( CO1:COM ) at 7%, DJStoxx 600 ( DJXSF ) at 6%, the US T-bill ( FHQFX ) at 4%, the Euro High Yield Index ( SPEUHDAN ) at 4%, the US High Yield Index ( IUYBF ) at 4%, the CRB Index ( CRB ) at 3%, the EM Bond ( EMB ) at 3%, the MSCI EM Equities ( EEM ) at 1%, and the European Investment Grade Non-financial at 0%.

Underperforming are the BTPs, down 1%; the US IG Corp ( ZIC:CA ), down at 1%, the EM FX Index (EMFXDBET), down at 2%; the US IG Non-Fin, down 2%; the EU Sovereign (EUR), down 2%; the German Bunds, down 3%; the Treasury, down 3%; the Shanghai Composite ( SSE ), down 4%; Silver ( SLV ), down 5%; Gilt (UK10Y-GB:United Kingdom), down 6%; Copper ( CPER ) down 6%; and the Hang Seng Index ( HSI ), down 6%.

The iBoxx US High Yield ( HYG ) has dipped below the US T-bill ( TBIL ) year-to-date.

“It also shows how difficult it is for any duration to perform in a sell-off, especially in a heavily inverted curve environment where carry is negative for government bonds relative to cash,” said a document from Deutsche Bank Research.

The equal weight S&P 500 ( SPY ) has underperformed cash at just under 1% return year-to-date in total returns.

“The interesting thing,” the DB report said, “is if you’d told most people at the start of the year that 10-year yields would be around 5% by October, not many people would have wanted to own the NASDAQ, given the near one-to-one negative correlation to yields in prior quarters. So, AI has helped create a dramatic decoupling.”

“However, with credit spreads still very tight, spreads would likely widen more than government bonds rally in a recession, so you still have to have a soft landing to get maximum benefit.”

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