Spotlight

The Fed Squares the Dots—Markets Yet to be Convinced

Robert Tipp, CFA, Managing Director, Chief Investment Strategist, and Head of Global Bonds

Although the markets’ conviction that the Fed will be cutting rates grew after the March 20th FOMC meeting, markets may not be easily convinced that the economy is back on Easy Street. Instead, the markets are reacting as if we are in a late-cycle investment environment, which gets riskier for stocks as growth ebbs, but more positive for bonds as the rate cycle has presumably crested.

Frequently Asked Questions The LIBOR Transition

Gary Horbacz, CFA, Principal, Structured Products Team, and Jason Pan, CFA, FSA, Senior Associate, Structured Products Team

Planning for the market’s transition from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) has accelerated recently, but substantial uncertainty remains as to how and when the conversion of nearly $370 trillion of financial products will occur. In our second white paper on the LIBOR transition, PGIM Fixed Income discusses: (1) the progress to date; (2) critical future milestones; and (3) concerns regarding the sufficiency of SOFR as an adequate LIBOR replacement.

Recent Thought Leadership

Is Your LDI Strategy Recession Ready?

Tom McCartan, FIA, CFA, Vice President, Liability-Driven Strategies

In this paper, we discuss the key risks to a U.S. corporate pension plan's funded status--declining long-term interest rates, tightening long-dated corporate spreads, credit migration, and falling risk assets--and shares practical steps plan sponsors can take now to protect funding levels ahead of the next recession.

Brexit Developments: Deal or Delay

Mehill Marku, Senior Investment Strategist

Despite shifting political dynamics and uncertainty about the sequencing of upcoming events, the base case remains that a hard Brexit will be avoided. That leaves two options as the likeliest scenarios: Prime Minister May’s deal or a longer extension of Article 50, which consequently results in a soft Brexit.

Weekly View: Relationships Between DM Rates and Policy Rates

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