Monthly Report
Markets re-focus on pace of inflation decline though US downgrade risks remain
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Absent further US banking woes, government bond markets re-focused on the pace of G7 inflation decline in May, and US downgrade risks in the debt ceiling crisis. Longer UK gilts were the worst performers, reflecting higher UK inflation. In contrast, China and EM bonds outperformed, helped by China’s low inflation outlier status.
Key highlights:
- Macro and policy backdrop – Lower energy prices drive disinflation, but wide dispersion of inflation persists
- Yields, curves and spreads – Yield curve inversion resumed. US spreads mostly widened on debt ceiling crisis
- Sovereign and climate bonds – HY Green spreads edged out in May, reflecting surge in issuance in Q1
- Performance – Duration became the investor’s enemy again in May, with UK gilts hardest hit
These reports provide actionable insights on global fixed income markets. They cover shifts in global yield curves and credit spreads, across sovereign, inflation-linked and corporate indices, and FX-adjusted return performance using proprietary month-end data from our global fixed income indices.
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