Yield outlook – Central banks tighten their grip
Over the past month, rates have continued to rise across maturities and regions. The global economy has shown more positive signs, supported by a manufacturing sector benefiting from massive investment in AI. In addition, the continued blockade of the Strait of Hormuz and attacks on several refineries have pushed energy prices higher, with oil above USD100/bbl and European gas at around EUR80/MWh. Central banks continue to raise policy rates and the ECB in particular is showing increased concern about the potential spillover effects of energy prices on underlying inflation. Combined with an improving nominal growth engine, this has pushed long-end rates higher. The first rate hike from the Fed since 2023 and the prospect of more hikes over the coming year have sent US rates higher across the curve. Fed: The beginning of rate hikes Since our last Yield Outlook publication, the Fed has delivered a rate hike, lifting the key policy rate to 3.75-4.00%. There was broad agreement in the monetary policy committee on the decision, and a majority of members saw a further rate hike before year-end, while 8 out of 18 members saw another one in 2027. Growth expectations were revised up and the unemployment forecast down. The inflation
