Risk assets have several fronts to worry about, with variants causing concern and political leaders yet again displaying their inability to do the right thing and blaming everyone else as a result, but there hasn’t been too much of a reaction.

Chinese government moves appear to be scrutinising and clamping down on everything and this is reflected in the Hang Seng which achieves a 20% correction while US indexes yet again achieve new highs.

Central banks are beginning to send clearer and more hawkish messages. The Federal Reserve is becoming fairly plain about its intentions to reduce asset purchases without, so far, the kind of volatility that we saw at the last Taper Tantrum. The July payroll number coming in at just shy of a mighty 1MM jobs is reflected in higher wage expectations and with strong ISM numbers and GDP rising at 6.5%, taking the size of the US economy back to pre-covid levels, it is becoming harder to make the case for not scaling back emergency measures.

The Bank of England’s MPC meeting and subsequent press conference provided more crumbs of clarity although their messaging remains a little random. However they appear to have moved into position as G4 favourite to begin policy normalisation first as the rate hurdle for decreasing asset purchases was reduced by 100bp to 0.5% (‘some modest tightening of monetary policy over the forecast period is likely to be necessary’). Strong inflation numbers, we are assured, might be purely temporary but the compounding effect of a longer period of above target numbers than expected (forecast by the NIESR to reach nearly 4% early next year) could prompt unease. Tightness in the jobs market is showing in wage expectations here too (service sector costs are rising at the fastest pace for 25 years) and shortages of skilled workers has held back construction growth.

The primary market in July felt as though some issuers went on holiday early. EUR denominated IG issuance was the slowest month since 2002 and apparently this is more due to lack of urgency on the part of issuers as opposed to lack of investor interest. GBP issuance was a little more robust but mostly of long duration by Housing Associations or the likes of Wellcome Trust and whilst I am an enormous fan of the institution, we remain reluctant to lend them money for 50 years at 1.5%. Financial issuance was mainly from less than compelling names. There is a strong pipeline building for September.

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