It’s been an ongoing struggle to be on the receiving end of rates for a couple of years and we generally find the rule of thumb to be the following: Don’t ever tactically buy bonds / receive rates until the last hike is in.

Conclusions up front:
– Inflation momentum is softening the most in Europe (also given today’s data)
– GBP rates looks like the best receiver case among majors
– Still, an elevated risk of another hike from the ECB, leaving EUR rates at odds
– A Fed pause may not necessarily be a big receiver case

If we look at inflation developments across the globe, we find the momentum in Europe worth noting. 3m annualized core prints at 1.81% (and will probably run around 2% after tomorrow’s inflation release), which is well below the momentum in the US. This is partially driven by seasonal patterns, but underlying price surveys also suggest that services pricing is fading hard in Germany, France and the UK for example due to less tight labour markets.

Recently inflation trends have heated up again in Lat-Am, which may prove to be at odds with the pricing of pronounced cutting cycles in Brazil and Chile for example.

Chart 1: Heatmap of global core inflation pressures