Real yields moved higher, increasing by roughly 40bps at the short end and 15bps at the long end. As a result, the breakeven inflation curve has fallen.
Reported inflation has decreased over the quarter. CPI has dropped from 3.3% in March to 2.6% in June. RPI has fallen from 4.1% to 3.0% over the same period. Inflation expectations for 2026 have cooled over the past few months, however market expectations are for one to two Bank of England rate hikes by the end of the year.
Credit spreads (versus swaps) have tightened by approximately 10bps from their YTD highs in March across all rating bands.
