Flash Fixed Income

France’s chronic government paralysis repeatedly created headlines this month, and fixed income markets are rightly worried about the sustainability of French government borrowing levels. Meanwhile, forecasts of a £50bn blackhole in the UK’s public finances are keeping gilt yields elevated and have made this November’s UK Budget a potential flashpoint.

With the Fed’s stance suggesting it is prioritising growth over sticky inflation risks, volatility in longer dated bonds is likely to persist and the case for increasing duration in fixed income is not compelling.

The Trump administration’s immigration policy leaves the US labour market at a pivotal juncture.

Softer US economic data means the pressures on UST yields now look more balanced, but headlines around President Trump’s pick for the next Fed chair are just one reason investors should expect rates volatility to continue.

The question for investors now is how much of the macro risk remains, and how well that risk is being reflected in asset valuations.

After a chaotic week in global markets following the tariffs announced by President Trump on April 2, at time of writing (April 10) investors are left to contemplate 125% tariffs on China, a baseline 10% on the rest of the world, 25% on auto imports and a 90-day pause on more punitive rates.