US | Positioning for rate normalisation
We see the strong pull back in long-term US yields since the peak of the reflation trade this year as an opportunity to enter new positions that capitalise on future macro trends driven by mid-cycle dynamics.
The recent price action means we are now ready to tactically enter trades which will benefit from sustained global growth as we go into 2022.
We telegraphed that the recent June Fed hawkish tilt would lead to a prospectively lower inflation risk premium, but we now believe this has largely played out in fixed income markets
We think the market has downwardly re-priced the Fed funds terminal rate too aggressively, and we see an uptick in the terminal rate from here.
High debt costs suggest European office price correction
Our analysis suggests a 10% correction is needed on average for the major office markets in Europe to compensate for the higher cost of debt, with prime yields required to soften by 10bps-75bps to generate a low-risk interest coverage ratio at a reasonable LTV.Find Out More
Why an ageing population doesn’t mean soaring inflation
What’s the future for inflation? Joachim Nagel, the new president of Germany's central bank, believes the rapidly ageing global population will play a key role – ramping up pressure on prices in the medium term. While we agree slowing labour supply will stifle output growth, in his recent discussion Nagel failed to fully consider the demand side of the argument.Find Out More