Jobs Report Won't Sway Fed That Much, Berro Says

Summary

Kelsey Berro expects the Federal Reserve to stay on hold this year, with inflation data more important than labor market data. She sees value in fixed income carry strategies, particularly in investment grade and high yield credit, driven by range-bound yields and strong credit fundamentals. Additionally, she identifies value in European, Mexican, and Indian government bonds as inflation softens and central banks may not deliver all priced rate hikes.

• Fed likely on hold for 2025, July hike improbable; focus shifts to inflation data.
• All-in yields attractive, favoring carry in fixed income as yields stay range-bound.
• Strong credit fundamentals, IG spreads stable, record issuance well absorbed; comfortable in IG and HY.
• Hyperscaler long-end credit pricing still in discovery but demand for compute remains above supply.
• Europe, Mexico, India government bonds offer value as inflation surprises to the downside.
• Japan's record-high yields add upward pressure to US long end but not derailing credit absorption.