Bond markets and equity markets have rallied sharply at the tail end of 2023 essentially based on a ‘soft landing’ scenario that sees inflation back at target as early as Q2 2024 whilst growth is weakening but not descending into a fully-fledged recession. This allows global central to cut rates – according to current market pricing – as early as March/April and will see up to 150bp of rate cuts before the year is out from the Fed and ECB respectively with other central banks hard on their heels. That being said, early in 2024, most parts of financial markets struggled to continue where 2023 left off – and we think for good reasons. Incoming data was not as weak as some might have hoped for – particularly in Europe – central bank speakers have been rowing back some of the dovish rhetoric and the usual and fully expected bond supply wave seems to leave some footprints in markets nevertheless. 10y bond yields have risen some 25-30bp since the low just after Christmas and credit as well as equity markets have given back some gains already.
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