Growth rebound further defers Fed easing, as disinflation stalls
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Wide dispersion of growth and inflation rates within the G7 shows little sign of ending, with stronger US growth driving US spreads wider. Markets project no Fed easing until 2024, despite some risk of more casualties of duration mis-matches (as in March). Only China and EM escaped the October sell-off at the long end.
- Macro and policy backdrop – Higher yields tightened policy for the Fed in Q4, extending the FOMC policy pause
- Yields, curves and spreads – Signs of capitulation in long Treasury sell-off, as US sovereign spreads widen
- Credit and MBS analysis – US IG and RMBS spreads widened, led by financials. European IG spreads more stable
- Sovereign and climate bonds – US underperformance narrowed performance gap between climate WGBI and WGBI
- Performance – Another weak month for longs in October led by the US, gilts and JGBs. HY credit also falls back
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