Fixed Income
UK disinflation and labor market softening support our overweight in Gilts and short GBP trade. UK CPI came in slightly hotter than expected in May, with headline inflation at 3.4% y/y (vs. 3.5% in April) and core CPI meeting expectations at 3.5%, down from…
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Fed Split On 2025 Cuts, But Cooling Data Supports Dovish Case
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In this note, we reaffirm our underweight position in JGBs and long yen positions given the BoJ’s meeting overnight.
ZEW expectations jumped in May, but underlying macro fragility supports a cautious stance on eurozone assets. The ZEW expectations index for the euro area rose to 35.3 from 11.6, with Germany also beating expectations. The current situation component improved…
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US Retail Worries
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Household data beat in May, but China’s macro story remains fragile, reinforcing our overweight in local government bonds. Traditional supply-side activity decelerated, with industrial production and fixed asset investment both weaker, while retail sales and…
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Consumer Sentiment Rebounds, But Fed Still Trapped by Sticky Expectations
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Elevated inflation expectations are keeping the Fed sidelined, reinforcing our long-duration and steepener bias in US rates. The US May CPI would have normally supported cuts, but the Fed cannot risk elevated short-term inflation expectations feeding…
The perfectly synchronised moves in US, Japanese, German, and UK 30-year bond yields through the past two months are odd… and irrational. These irrational moves present compelling investment opportunities.
While we anticipate higher inflation in June, it looks increasingly likely that the price impact from tariffs will be less aggressive and long-lasting than many feared.