00:00This reprieve that we're seeing in the markets, the bond markets this morning, is it going to be short-lived?
00:06I think it's going to, it's not necessarily going to be a sort of yield stay where they are for
00:11now.
00:11I think what we've seen in the past week is a bit of an unwind of some sort of crowded
00:15short positions that we've seen in the market.
00:18Then, of course, we've seen real yields also track higher.
00:21So it's starting to feed into that sort of fiscal story once again.
00:24And especially for the U.S., where that's largely been ignored sort of throughout 2025, that's now starting to come
00:29to the fore.
00:30And then when we look at other dynamics, say in the U.K., for example, that political risk was starting
00:35to surface.
00:36That started to fade a little bit.
00:38But that inflation story continues to pretty much be feeding into what's happening in bond markets at the moment.
00:44It certainly does look a lot more interesting for bond investors to start to look at, especially at the U
00:49.S.,
00:49where it's sort of been lagging other markets like the U.K. and Europe.
00:52But we're OK to be patient at the moment.
00:54OK. In terms of what you're interested in, is that the long end of the U.S. Treasury curve?
00:59Is it the 30-year at 5.18, close to 5.2, that's starting to look attractive?
01:04At what level do you want to be buying at the long end, if it is the long end that
01:07you're looking at?
01:08So we've actually been underweight at the long end for some time.
01:11And it's really due to the fact around some of these fiscal concerns,
01:14as we sort of felt that yields were still a bit too suppressed, given some of the size of the
01:19deficit,
01:19as well as we've got the Fed that is essentially on hold.
01:23And we're starting to see that some of that was not really priced into the curve.
01:26So we're actually happy to be sort of on the shorter end.
01:30But at the same time, it starts to look a lot more interesting with 30-year real yields at levels
01:34that we haven't seen since the GFC.
01:36So it's certainly an area that we'll continue to watch out for.
01:39Is the market overpricing the Bank of England when it comes to hikes?
01:43We would say so.
01:44So our view is that given policy is already in restrictive territory at 375,
01:50we also have a labour market that is weaker than it was in 2022.
01:54And even when we look at the decision-maker panel sort of survey from April,
01:58we have businesses expecting that wages will be lower, a touch lower in a year's time.
02:04Also employment as well to be a touch lower.
02:06So we continue to see that weakness in the labour market feeding into the Bank of England,
02:10perhaps not hiking rates as aggressively as what's currently priced into the markets.
Comments