Behind the Curve

| Multi-Asset

Year-to-date, US bonds have strongly underperformed their G7 peers, with 10-year yields up 80bps due to higher growth expectations and increasing inflationary pressures. We think that there is a risk that inflation pressures will be less ‘transient’ than expected, increasing the odds of the Fed sitting “behind the curve” and later being forced to change course more rapidly than projected. We therefore expect tapering of asset purchases to happen more quickly than current pricing suggests, and liftoff in interest rates to take place earlier than the current projection of 2023.

The Central Bank Heartbeat is a discretionary indicator that measures central banks‘ stance. Each policy makers‘ declaration is either classified as dovish, neutral or hawkish, translated into a score from -1 (dovish) to +1 (hawkish) and accumulated over time. It allows us to track changes in policy making and ultimately compare it with market pricing.


Behind the Curve
Source: Bloomberg, Unigestion. Data as at 26 March 2021.

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