US Rates– The yield curve has flattened close to levels not seen since before the financial crisis. Whether this is indicative of an upcoming recession or not has good arguments on both sides. The front end of the curve will likely continue to grind higher given the scheduled treasury supply and if Powell stays the course. The markets believe that he will with virtually no change in the implied probability of rate hikes as indicated by the futures markets despite the “not thrilled” comments from Trump.

Canadian Rates– Despite inflation running around 2% and April GDP surprising to a small upside, the BOC can be expected to remain cautions about raising rates in the second half of 2018 thus lagging the FED. NAFTA uncertainty, tariffs on Canadian steel, reduced energy exports and slowing housing markets are enough concerns for the BOC to be treading lightly.

Corporate Credit– Conventional wisdom stipulates that late cycle is not good for corporate profits and hence subsequently corporate bonds, however this is not a conventional late cycle. US business profitability remains near record highs and with a strong economic backdrop, corporate credit remains attractive in the short term.

High Yield– The alarms are not yet sounding for the high yield and leveraged loans market. Adding to record profits are strong balance sheets in the US and also in Europe.

Emerging Markets– EM debt looks particularly attractive given that the EM economies are likely in their early to mid cycles of business growth. The continued trend of oversubscriptions at EM debt auctions further strengthens this view. The strong US dollar can be a headwind, but the current strength in the greenback is likely to eventually reverse over the long term.