Jenna Barnard, Co-Head of Strategic Fixed Income, explains how the team have viewed the bond markets through the prism of interest rate divergence for a number of years now.
There is a clear divergence in interest rate policies within the developed markets, with the US Federal Reserve standing alone from the pack.
As a consequence of the monetary policy divergence, US dollar strength is driving a series of liquidity events.
The Strategic Fixed Income Team see the pressures in the financial markets this year as linked, due to the ‘liquidity withdrawal environment’, and not idiosyncratic, as many believe.
The uptick in inflation is, in their view, cyclical and not structural.
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