- One of the main questions that will determine the near-term direction in financial markets, and in rates in particular, is whether the current spike in inflation heralds a period of faster activity and price growth, or whether it will bring the demise of the current recovery.
- The most downbeat interpretation of the recent spike in prices is to be found in USD markets. We see the curve flattening in most cases.
- In Europe, the mood is more upbeat, but higher rates are spilling into wider sovereign spreads. The stress is contained so far, but warrants monitoring.
For further details see:
Rates Spark: Good Inflation / Bad Inflation