If you are a fundamental based trader or investor, you have probably found that your positions have become fairly (both positively and negatively) correlated across and within markets, which makes risk-taking more difficult.

Japan is an interesting case. The BOJ continues to normalize its policy and reduce the level of accommodation (as measured by real overnight rate). If they are on track to achieve their target of 2%, the policy rate will gradually go to 1.5-2%. The question is how quickly we go there.

EM sovereign spreads are extremely tight as well, while we are not as tight as we were during 2006-07 period when we had the biggest EM and commodities bull run, the current level does not offer good risk premium to assume the risk.

And how should we think about the curve? Will the 2s10s trade north of 300bps when the Fed is done cutting rates for the cycle? Or are we going to break our collective brains when the curve trades as flat as pancakes?