Fixed Income   |   March 5, 2020

An Update on our Treasury Crossover

Caroline Grandoit
Global Head of Total Portfolio Solutions
Robert Petty
Executive Director and Chief Executive Officer, Fiera Asia
Caroline Grandoit
Global Head of Total Portfolio Solutions
Robert Petty
Executive Director and Chief Executive Officer, Fiera Asia
Judy Wesalo Temel
Senior Vice President, Director of Credit Research
Judy Wesalo Temel
Senior Vice President, Director of Credit Research
Candice Bangsund
Vice President and Portfolio Manager, Global Asset Allocation and Private Markets Solutions
Dominic Bokor-Ingram
Senior Portfolio Manager
Candice Bangsund
Vice President and Portfolio Manager, Global Asset Allocation and Private Markets Solutions
Dominic Bokor-Ingram
Senior Portfolio Manager
Judy Wesalo Temel
Senior Vice President, Director of Credit Research
Dominic Bokor-Ingram
Senior Portfolio Manager
Judy Wesalo Temel
Senior Vice President, Director of Credit Research
Judy Wesalo Temel
Senior Vice President, Director of Credit Research
Kenneth M. Potts
Senior Vice President, Portfolio Manager
Dexter J. Torres
Senior Vice President, Portfolio Manager, Head of Trading
Brian P. Meaney
Senior Vice President, Taxable Bond Strategist
Candice Bangsund
Vice President and Portfolio Manager, Global Asset Allocation and Private Markets Solutions
Candice Bangsund
Vice President and Portfolio Manager, Global Asset Allocation and Private Markets Solutions
Brian P. Meaney
Senior Vice President, Taxable Bond Strategist
Judy Wesalo Temel
Senior Vice President, Director of Credit Research
Brian P. Meaney
Senior Vice President, Taxable Bond Strategist
Candice Bangsund
Vice President and Portfolio Manager, Global Asset Allocation and Private Markets Solutions
Judy Wesalo Temel
Senior Vice President, Director of Credit Research
Reese K. Trucks
Vice President, Credit Research
Josefa Palma
Investment Counselor, Private Wealth
Carolyn N. Dolan
Executive Vice President, Head of US Private Wealth
Candice Bangsund
Vice President and Portfolio Manager, Global Asset Allocation and Private Markets Solutions
Brian P. Meaney
Senior Vice President, Taxable Bond Strategist
Candice Bangsund
Vice President and Portfolio Manager, Global Asset Allocation and Private Markets Solutions
Dexter J. Torres
Senior Vice President, Portfolio Manager, Head of Trading

Growing fear and uncertainty surrounding the spread of the “Novel Coronavirus” has led to market volatility and a subsequent flight to quality in recent weeks. These conditions have greatly benefited the Treasury crossover trade we implemented in our Tax Efficient strategies.  In mid-January, short end Municipal-Treasury ratios fell into the mid 50% range which is one of the lowest levels seen in over 30 years. During that time, we increased our Treasury allocation to a target of 10-15% of portfolios with expectations that the relation would normalize. Recent developments in the market have caused Treasuries to greatly outperform municipals to the point where short end ratios have increased to almost 100%. We are currently in the process of taking profits in the crossover trade by selling a portion of the Treasury position and buying high quality municipals which now appear very cheap to Treasuries.

2 Year AAA Municipal/Treasury Ratio

Sources: Thomson Reuters, JP Morgan as of March 3, 2020.

You can find Fiera Capital’s latest analysis and updates on COVID-19 by clicking here.

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