The renewed rise in consumer price inflation in the UK reported today contrasts with the dip in the US announced yesterday. Admittedly, the former has risen from a low level, while the latter has eased back from a high one. But these outcomes have coincided with a recent relative shift in inflation compensation in the two economies, which has fed through to some underperformance of Gilts vis-à-vis Treasuries. We don’t expect inflation in the UK and the US to head in opposite directions indefinitely, though, and foresee a smaller rise in the 10-year yield in the former than the latter between now and the end of 2022.
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