BA/ML analyst Hans Mikkelson declared...>

US PIPELINE: BA/ML analyst Hans Mikkelson declared it's "Goldilocks for high

grade" bonds as "outperformance of high grade vs. high yield the past 3 months

has been striking." 

- He adds "since 1997, there have only been 5 instances of 3-month periods where

the average monthly excess return for high grade was at least 50bps, and for

high yield only up to 25% better (beta less than 1.25), including the most

recent period May-July 2017. Before that were the overlapping Aug-Oct 2012 and

Jul-Sep 2012 periods following ECB Pres.Draghi's famous pledge to do what it

takes to save the Euro." Then there was "Nov 2008-Jan 2009 as policy

intervention, including QE, calmed mkts at the height of the financial crisis"

and "earliest such period was Mar-May 2001, as the Fed lowered rates

aggressively" into recession, he said.

- He adds "main driver of high grade outperformance" is "backdrop of weakness in

US economic data - but not too weak - and the lack of inflation globally that

ensures foreign central banks remain very dovish and motivate large inflows into

US high grade assets."