These Were The Best And Worst Performing Assets In February And YTD

After what DB's Jim Reid wrote was an incredibly stable January, "February saw no such repeat as investors positioned themselves for the prospects of a much stronger-than-anticipated economic recovery over the coming months."

The effects, as everyone can recall, were seen across multiple asset classes, with sovereign bonds selling off sharply as investors brought forward their expectations of central bank rate rises. While equities saw modest gains for the most part over the month, the rise in yields meant they fell back from their all-time highs in mid-February.

Over in commodities, those set to take advantage of the recovery performed strongly, such as oil and copper, but gold has been the worst YTD performer in DB's sample as investors have continued to move out of the traditional safe haven and transition over into "new age" fiat alternatives such as bitcoin which another amazing return, rising 39% in February despite a sharp dip at the end of the month.

Starting with sovereign bonds, all of the countries in DB's sample saw their government debt lose ground for the second month in a row, as investors became much more optimistic on the prospects of an economic recovery, as well as a potential return of inflation. The changes in sentiment have come amidst better-than-expected economic data, the continued rollout of the vaccine, as well as the likelihood that the Biden administration will pass a large stimulus package in the coming weeks. In response, US Treasuries fell -2.3%, which is their worst monthly performance since November 2016, following the election of Donald Trump when investors similarly reacted to the prospect of much bigger fiscal stimulus.

Over in Europe, Italian BTPs outperformed the other government bonds, only seeing a -0.8% decline, thanks to the positive reaction to former ECB President Draghi becoming Prime Minister. Indeed, the spread of Italian 10yr yields over bunds actually fell beneath 100bps during the month, which is the first time that’s happened since early 2016.

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