ISCV - Has Inflation (Fear) Peaked?

• Markets traded last week as if inflation fear has peaked. The move in cash bond yields really don’t do the shift justice, with the trend still firmly up. Rates futures, however, tell a more interesting story.
• The Dec-23-Dec-22 curve in the US is now inverted by a whopping 40bp, a classic sign that markets are worried that the Fed is about to hike the economy into recession. The equivalent spread in Europe is not quite there yet, but it flattened sharply last week.
• Though early Q2 evidence that the rate of acceleration in core inflation is easing is welcome but far from conclusive.

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