Citi‘s Most Read – FICC

Research evidence excerpt

Citi‘s Most Read – FICC

Quantitative Global Macro Strategy - Where are all the allocators’ blocks? Still

Risk-On, but With Cracks

Asset allocators remain pro-risk with a cautious optimism, reducing positions

across equities, rates, and credit. They note sticky inflation and the broader

consequences of geopolitical events as potential concerns but remain constructive

on AI-driven growth. However, we see an increased discussion of AI valuations

following strong performance. Consequently, managers reduce exposure in the AI-

heavy EM and US overweights but remain long. European equities overweight

remains popular. In rates, managers reduce rates longs upon sticky inflation

worries but the UST underweight sees a large trim; Gilts remain a consensus long

despite political upheaval. Credit allocations also see negative moves with US IG a

popular underweight. Commodities see large changes; interestingly, energy is

gaining popularity despite oil price weakness, as is base metals, while gold loses

some popularity-shine. In FX, we finally saw significant reductions in USD short

and JPY long while EMFX remains a consensus overweight. The cash underweight

was maintained.

Alex Saunders | Dirk Willer | Alice Zheng | Adam Pickett | Giammarco Miani

Managers remain risk-on this month. They remain overweight equities, but slightly trim EM & US.

Rates saw decreases ex-USTs, which saw a large increase. Though oil prices continued to cool,

energy has gained more conviction as a long, surpassing gold. EMFX is the consensus long vs US

IG short.

Japan FX - Why no second round of intervention as yet?

We look at the reasons the government has so far deferred a second round of

intervention to buy the JPY from the perspectives of 1) the IMF Exchange Rate