However, Trump basically came away with nothing except learning what the Thucydides Trap meant. After failing to gain a concrete commitment from China to help with his campaign against Iran, he petulantly stated that he didn’t need the Strait of Hormuz open anyway.

Jerome Powell stepped down as Chairman with all the grace he has managed to maintain in the face of some withering personal attacks and stays as a voting Governor on the FOMC. The economic situation ‘sock-puppet’ Warsh has inherited is not one he would have chosen if he is to fulfil his masters desire to slash rates, a strong economy with rising inflation does not facilitate that.

US money markets are discounting the next move to be a hike and Treasuries have seen nothing but rising yields and bear steepening. With the 10 year through 4.5% and the Long Bond well over 5%, the costs of servicing the US debt mountain are rising. Japan is suffering a high inflation environment like everyone else and the BoJ looks ready to hike, which has implications for the carry trade and therefore US Treasury demand.

Euro rates are also pricing in a hike. Dombrovskis, the EU’s economy chief, reiterated that the ECB must act to counter the effects of inflationary pressures pushing up prices as a result of the war. He and fellow ministers can’t make the independent ECB do their bidding, but it doesn’t stop them applying pressure.

Inflation worries and political uncertainty have helped long dated Gilt yields to return to 1998 levels. The Gilt curve has moved as a whole and, while it is pointed out at every opportunity that we have the highest rates in the G7, we have actually moved pretty much in line with others. Weak jobs data and wage growth ensure that the Bank remains in a bind and the SONIA curve still prices in two hikes this year. 

On the political front, no one knows whether Starmer will survive but the process is a long drawn out one. Andy ‘not in hock to the bond markets’ Burnham now says he will reject any change to the fiscal rules.

Primary markets continue to run at high capacity. Forecast hyperscaler investment has been upscaled to $750bn in 2026 with a significant chunk coming from capital markets and there is the possibility of indigestion at some point. However, there is no sign so far, strong books for every new issue and precious little NIP. Credit spreads remain well supported by this demand and Sterling spreads have returned to levels last seen before the war.
 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.