UniCredit: Increasingly Attractive Government Bond Valuations

UniCredit write “rate-cut expectations have retraced to price in a less-aggressive easing path for the ECB and the Fed while economic growth data mostly surprised to the upside. This pushed equities and bonds in separate directions, making government bonds more attractive in relative terms. Momentum is strong for risky assets, but several segments look increasingly overbought.”

• “We recommend moderately underweight positions on eurozone and US equities, and a neutral stance in EM equities. Across bonds, we prefer UST and core EGBs to European credit (we see more risk for the lower-rated segments of the market) and EM bonds. We retain a neutral view on commodities.”