A month that has seen inflation fears building with ‘shock’ growth in US CPI, while central bankers insist that this is a passing phenomenon.

UK CPI also jumped back up to March 2020 levels and will surely be up to the Bank’s 2% target level later this year. As we have said on a number of occasions, this year’s figures will be lumpy, we have a lot of distortion to work through, the question remains as to what happens after that. The central banks have a point, the current revival will likely fade, but we expect a stronger recovery than many and a number of the deflationary effects of the previous ten years (forced retrenchment by the banks for example) have gone. So I suspect that inflation will not fade right back and will need to be taken more seriously, i.e. rates are too low across the board and downright scary at the longer-end.

Bond yields moved surprisingly little overall, probably held back by the poor US employment data, the US ten-year picked-up to 1.62% (still below the end-March highs), while the UK ten-year is at 82bp having flirted with 90bp as the Bank’s tone edged a bit more hawkish. German and Swiss ten-year rates are the only (Europeans) remaining negative. Equity markets have seen volatility picking-up again, the NASDAQ having weakened while the S&P 500 is little changed.

It was a quieter month for activity in the Tenax Fund, cash is higher following an FRN maturity and some equity and infrastructure sales, but the broad asset mix has not changed significantly, see chart right.

Our floating rate exposure has drifted down with maturity of an LBBW note that we held. We aim to re-build this exposure, floating rate paper is just where we wish to be in this climate. The only change to the fixed interest holdings was the addition of a small holding in a new issue from Virgin Money UK. The overall duration of the fixed and floating rate holdings remains at 2.6.

Within infrastructure, it has been a good period for our energy storage and efficiency holdings so we have reduced this marginally. In a similar vein, we reduced exposure to European warehousing logistics with sales from our holding in Tritax Eurobox, otherwise, property still presents a mixed picture and opportunities look to be building. In equity, we have continued to reduce exposure to smaller companies, which have done well for us.

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