- Ten-year government bond yields stand at around 4.5% in the US and UK – a level that reflects current central bank policy.
- Central banks are maintaining their higher for longer rhetoric. But we see signs that a sustained fall in inflation is underway.
- We are watching US employment data closely – and so is the Federal Reserve. If a US recession does occur, we expect it to be short and shallow.
- The prospect of a downturn would prompt a reversal in Fed policy. And that would be good news for bond markets.