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Credit

In 2019, what is the key risk to US HY performance?		In 2019, what is the key risk to European HY performance?

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Q4 2018 Q3 2018

Weaker	Pickup in fallen	Worsening	Tightening central	Higher risk-free
international	angel volumes	corporate	bank policy	yields
demand		fundamentals

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Weaker	Pickup in fallen	Worsening	Tightening central	Higher risk-free
international	angel volumes	corporate	bank policy	yields
demand		fundamentals

In 2019, I expect investment grade credit spreads to be

80%

70%

60%

50%

40%

30%

20%

10%

0%

Wider than current	Wider than current	Tighter than current	Tighter than current
spreads in both the US	spreads in the US,	spreads in the US, wider spreads in both the US
and Europe	tighter in Europe	in Europe	and Europe

In 2019, I expect high yield total returns to be

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Higher than current	Higher than current	Lower than current	Lower than current
yield in both the US	yield in the US, lower in	yield in the US, higher	yield in both the US
and Europe	Europe	in Europe	and Europe

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14	December 14, 2018

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Interest rates

At what level do you expect the fed funds rate to peak in the current hiking cycle in the US (upper end of the range)?

By when do you think the hiking cycle in the US will be over?

45%

Q4 2018 Q3 2018

40%

35%

30%

25%

20%

15%

10%

5%

0%

2.50%

2.75%

3.00%

3.25%

3.5% or higher

At what level of reserve balances (current $1.8trn) do you expect the Fed to stop the balance sheet run-off?

40%
35%
30%
25%
20%
15%
10%
5%
0%
Above $1.5trn	$1.25-1.5trn	$1-1.25trn	$0.75-1.0trn	Below $0.75trn

30%
25%
20%
15%
10%
5%
0%
Q2 19 or sooner	Q3 19	Q4 19	Q1 20	Q2 20 or later

Where do you expect 10y UST yields to be at the end of Q1 19 (currently 3.1%)?

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Less than 2.75%	2.75 - 3.0%	3.0 - 3.25%	3.25 - 3.5%	Above 3.5%

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15	December 14, 2018

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Interest rates

By when do you expect the 2s10s Treasury yield curve to flatten to 0bp (currently ~25bp)?

Where do you expect the policy rates in the UK to be at the end of 2019 (current policy rate = 0.75%)

30%
25%
20%
15%
10%
5%
0%
Q4 18	Q1 19	Q2 19	Q3 19	Q4 19 or later

By when do you expect the ECB take the depo rate to 0bp (currently -40bp)?

40%
35%
30%
25%
20%
15%
10%
5%
0%
0.5% or below	0.75%	1.00%	1.25% or higher

Where do you expect the deposit rate to be at the end of the ECB hiking cycle?

	40%						Q4 2018	Q3 2018			60%							Q4 2018	Q3 2018
	35%										50%
	30%										40%
	25%										30%
	20%
	15%										20%
	10%										10%
	5%										0%
														The ECB will not be	0.5-1%	1-1.5%		Higher than 1.5%
	0%
														able to hike beyond
			H1 2020	Sep-2020	Dec-2020		Sometime in 2021
														0.5% in this cycle

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16	December 14, 2018

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Interest rates

Where do you see 10y Bund yields by the end of Q1 (current level = 0.36%)?

Where do you expect 10y Italian spreads to be by the end of Q1 (currently c.300bp)?

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
0.00 – 0.25%	0.25 – 0.50%	0.50 – 0.75%	0.75 – 1.00%	Above 1.00%

35%
30%
25%
20%
15%
10%
5%
0%
Below 200bp	200-250bp	250-300bp	300-350bp	Higher than
				350bp

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17	December 14, 2018