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.

Key points:

  • 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.