- US Treasury yields rose every session last week. The 2-year yield rose to a post-SVB high of 4.28% on Friday. The 10-year yield climbed back up to 3.70%. The 30-year yield hit 3.95% (page 2)
- The Treasury market is having to reprice. Moderating growth does not mean imminent rate cuts. Investors having to rethink quick return to pre-pandemic neutral rates
- Small rise in breakeven inflation rates last week. But real yields are driving the reversal higher in nominal Treasury yields, following the regional banking crisis (page 10)
- Real yields are now back up above 1.50% across the curve, apart from 10-years (1.46%), and now approaching the pre-SVB highs. For 30-years, the inflation-indexed yield hit 1.66%, a new YTD high. Fiscal policy remains far too loose, as debt ceiling deadline looms (page 7)
- Fiscal risks may require 2% real yields
- Pressure on JGBs has eased a bit, despite evidence of strengthening service sector inflation. Yen weakening as real rates diverge from other developed markets. But this needs to be set against sharp investor inflows into equities, as Japan looks set to benefit from geopolitical shifts (pages 16-18; page 29)
- Gilt sell-off has been remarkable: UK gilt yields approaching mini-budget crisis levels. 10-year Gilt yield up to 4.01%, the highest since October 21st 2022. 30-year Gilt yield highest since October 17th 2022. Real yields are climbing sharply: a function of global economic conditions (rise in US Treasury yields, loose fiscal policy in the UK as well as the US, and a BoE that fell far behind the curve). Little political pressure to bring about a reduction in PSNB ex: real yields could rise further, with 2% not out of the question (spot rates) (pages 19-22)
- The 30-year nominal government bond yield in Germany hit the highest since January 22nd 2014 last week (page 23)
- The 30-year Italian government bond yield is now up to 4.79% (page 25)
- Greece government bond spread continues to narrow (page 28)
- Stronger couple of weeks for the dollar. Renminbi weakening: soft economic data, low inflation (producer price deflation) and geopolitical risks, with tensions continuing to build (pages 29-32)
- TOPIX highest since August 2nd 1990, as bullish Japan investment thesis takes hold. In USD terms, S&P500 & TOPIX neck-and-neck for YTD price return (9.2% vs 9.6%). European equities performing strongly too (page 40)
- Technology stocks jump in the US despite the rise in real yields (pages 42-51)
- Chinese government bonds rally: persistent weakness in China (pages 52-54)
- Hang Seng mainland properties index casts doubt on strength of Chinese real estate recovery (page 56)
- Turkish lira, South African rand under pressure (page 60)
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