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The prospect of a long period of high bond yields and some signs of fiscal slippage by Prime Minister Meloni’s government have worsened the outlook for public finances in Italy. We now think the debt ratio is likely to increase rather than to fall in the …
1st November 2023
House prices confound expectations The large increase in house prices in October was a massive surprise given higher mortgage rates should be severely restricting the number of people able to buy and the amount they can spend. But at present, stretched …
With wage growth set to strengthen further over the coming year, we think the Bank of Japan will soon have sufficient confidence in the sustainability of higher inflation to end negative interest rates . The Bank of Japan has been arguing that wage growth …
House price rally will slow in earnest With house prices now at a record high and affordability constraints becoming increasingly binding, Australia’s housing rebound will soon run out of steam. In seasonally-adjusted terms, house prices across …
This page has been updated with additional analysis since first publication. RBNZ to hold the line as labour market continues to slacken With the balance of demand and supply in the labour market showing further improvement, we’re more convinced than ever …
31st October 2023
Surge in house prices continues Another large gain in house prices in August suggests that the extremely limited supply of existing homes for sale continued to outweigh high mortgage rates. We think monthly gains in house prices will soften over the …
Sharper slowdown in wage growth still lies ahead The slightly stronger 1.1% increase in the employment cost index in the third quarter is another sign that the earlier rapid easing in labour market conditions may be fading, but the forward-looking …
This page has been updated with additional analysis since first publication. The surprise stagnation in August and preliminary estimate that GDP was unchanged again in September imply that third-quarter GDP probably edged down by 0.1% annualised, marking …
The Bank of Japan today de facto abolished Yield Curve Control and we think policymakers will call time on negative interest rates as soon as January . A casual reading of today’s statement would suggest that policy settings were left unchanged: the Bank …
RBA will hike by 25bp next week as inflation and labour market continue to run hot But there will be a high bar for additional tightening further down the road As the economy takes a turn for the worse, rate cuts still likely in Q2 2024 With inflation …
We are resending this publication because it was incorrectly sent as a Japan Economics Update. Note: We'll be discussing h ow much of a threat are surging bond yields to Asia’s economies in our Asia Drop-in today, 31st October. Register here to join the …
Note: We'll be discussing h ow much of a threat are surging bond yields to Asia’s economies in our Asia Drop-in today, 31st October. Register here to join the online briefing. Bank of Japan will tighten policy further next year The Bank of Japan today de …
Note: We'll be discussing h ow much of a threat are surging bond yields to Asia’s economies in our Asia Drop-in today, 31st October. Register here to join the online briefing. This page has been updated with additional analysis since first publication. …
On the back of upward adjustments to our 10-Year Treasury yield forecasts, we now expect to see a larger increase in cap rates. This will see office cap rates rise to over 6.5% by end-2024, pushing the peak-to-trough price fall for the sector to more than …
30th October 2023
A renewed surge in the spreads of private-label commercial mortgage-backed securities (CMBS), at a time when the spreads of high-yield (HY) corporate bonds have remained fairly subdued (see Chart 1), has attracted little attention in US bond markets amid …
London house prices have fallen by less than we anticipated, and stopped falling altogether in Q3. However, the high level of house prices compared to incomes should mean that higher mortgage rates weigh particularly heavily on demand from mortgaged …
While we think sticky core inflation will mean that the Bank of England keeps interest rates at their peak of 5.25% until late in 2024, we think the markets have gone too far in concluding that rates will still be as high as 4.50% by the end of 2025. We …
Approvals bottom out, but will remain low The drop in mortgage approvals in September left them a third below their usual level in the years leading up to the pandemic as high mortgage rates put homeowners off moving and priced many first-time buyers out …
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) This page has been updated with additional analysis since first publication. Drag on lending and …
This page has been updated with additional analysis since first publication. Surge in retail sales bolsters case for policy tightening With Australia’s retail recession likely having ended last quarter, it’s all but certain that the Reserve Bank of …
It's Fed week and Deputy Chief US Economist joins David Wilder to discuss what to expect from the Tuesday-Wednesday FOMC meeting, including how the recent surge in long bond yields could influence the decision and accompanying language. Andrew also …
29th October 2023
5% Treasury yields, geopolitics vs the Fed, China’s dollar dilemma, an AI stock bubble and more …
20th October 2023
Today’s rebound in Amazon’s share price following news that its sales were better than expected in Q3 has shored up the performance of the ‘Magnificent 7’ in what has otherwise been a tough week for most of them amid a mixed bag of reports, lingering …
27th October 2023
The Bank of Canada’s insistence that inflationary risks have increased seems at odds with its new forecasts, which show a large degree of economic slack opening up next year. Our view that the Bank is still overestimating the near-term outlook for both …
Has the AI productivity boom already begun? New Speaker, old problems The House Republicans finally managed to elect a new Speaker this week, with the caucus eventually rallying around Mike Johnson, who up until this week could hardly have been described …
Stronger rise in core prices likely to be a blip The stronger gains in real consumption and the core PCE price index in September are a potential concern for Fed officials, but won’t be enough to convince them to resume raising interest rates next week, …
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) In the last few months there has been more concern over the accuracy of key economic data. The recent …
Global goods trade rose slightly in August and timelier data point to further gains in September. But we expect global trade to fall again in due course as economic downturns in several advanced economies weigh on their demand for traded goods. According …
In line with our upwardly revised forecasts for the 10-year US Treasury yield, we’ve raised our projections for 10-year government bond yields in most other developed market economies. But we still expect those yields to fall, in general, by the end of …
BoJ probably won’t tweak Yield Curve Control Media reports suggest that the Bank of Japan may tweak Yield Curve Control yet again at next week’s Board meeting. That’s certainly possible: 10-year JGB yields have risen sharply since the launch of the new …
RBA has more work to do Most of the data published this week highlight the imperative for the RBA tighten policy. To start with, Wednesday’s CPI release showed that Australia’s inflation problem is far from over. In fact, there are two pieces of …
This page has been updated with additional analysis since first publication. Underlying inflation set to decline further While the jump in inflation in Tokyo to a seven-month high wasn’t nearly as bad as it looks, it is consistent with our view that …
The Q3 RICS survey indicated occupier and investment sentiment fell further in Q3, with the latter reflected in weak investment volumes throughout the summer months. But tight credit conditions and a slowing economy mean the trough in confidence is …
26th October 2023
Weak demand and investment, but capital values nearing the trough Having started the year on a somewhat promising footing, all-property occupier demand has weakened since and fell further in Q3. The demand balances for offices and retail remained …
Norges Bank is almost certain to leave its policy rate unchanged at 4.25% next week. And we suspect that, given September’s weak inflation data, it will also soften its language about implementing one final rate hike in December. Next year, we think the …
Although US high-yield (HY) corporate bonds are more attractively valued than at any time since the Global Financial Crisis (GFC), we doubt they will outperform US equities over the next couple of years. The yield of ICE BofA’s index of US HY corporate …
Our new higher forecasts for US Treasury yields mean that mortgage rates won’t fall as quickly as we previously predicted. While we still expect mortgage rates to decline they are unlikely to fall below 6.0% before end-2025, muting any recovery in house …
After the 336,000 jump in non-farm payrolls in September, we expect a more modest 200,000 increase in October. Moreover, despite some strength in labour demand, wage growth continues to ease. September’s unexpectedly-strong 336,000 rise in non-farm …
US households still the world’s spenders of last resort On its own, the stunningly-strong 4.9% annualised gain in third-quarter GDP suggests that the Fed needs to do even more to slow demand, but just as notable was the slowdown in core PCE inflation to …
The -1.4% quarterly return in Q3 meant that there have now been four consecutive negative quarters for all-property total returns. That figure was dragged down by a 5% q/q fall in office values as all-property values fell by 2.4% q/q. That took the …
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) A second consecutive hold to all-but confirm that 5.25% is the summit for interest rates Sticky core …
Strong immigration is unlikely to be enough to prevent a mild recession, with GDP contracting recently and the business surveys consistent with further declines. As house prices are falling again, household debt is elevated and high interest rates are …
25th October 2023
