Implications for Fixed Income Investors
With underlying economic growth still tepid, we think the ECB will need to allow the shock to play out before resuming a neutral stance. Pre-war, we expected a gradual easing cycle to be completed by end-2026; we now see that shifting to end-2027. The longer the oil shock persists, the longer the ECB is likely to maintain a hawkish stance. That said, if a ceasefire holds and oil prices retreat, the additional hikes currently priced by markets are unlikely to be delivered. The situation for the BoE is different. Pre-war, markets had cuts priced in; in a de-escalation scenario, those cuts should come back onto the table by year-end. Against this backdrop, we expect further front-end repricing, which makes long positions in the front-end of European curves attractive—potentially expressed via curve steepeners. In particular, we see the UK front-end as having more room to outperform European curves.
About the Bond Bulletin
Each week J.P. Morgan Asset Management's Global Fixed Income, Currency and Commodities group reviews key issues for bond investors through the lens of its common Fundamental, Quantitative Valuation and Technical (FQT) research framework.
Our common research language based on Fundamental, Quantitative Valuation and Technical analysis provides a framework for comparing research across fixed income sectors and allows for the global integration of investment ideas.
