Fixed Income

Expected inflation has surged to its highest level in a year. This has surprised many people, but expected inflation is behaving just as expected. Expected inflation is not a prophecy, it is just a mathematical function of delivered inflation. We discuss what this means for central banks in the US, UK, euro area, and Japan. Plus: bitcoin’s structural uptrend to $100,000+ is still intact.

We feel as good about spurning the soft-landing narrative today as we did about spurning the recession narrative a year ago, but we are not giving into complacency. This week’s report looks at two key ways that we may be getting it wrong: by underestimating households’ asset support and the labor market’s durability. We remain tactically neutral but continue to look for opportunities to turn defensive.

In this Strategy Insight, we take a comparative look at two of the largest spread product sectors in Europe – Italian government bonds and investment grade corporates. We make the case for favoring Italy over investment grade in the event of a downturn in European economic sentiment.

Despite the economy being on the verge of a recession, the South African Reserve Bank will not ease policy meaningfully. Doing so will accentuate the currency depreciation, which, in turn, will push up bond yields – an outcome the central bank would like to prevent.