The real yield curve has also moved higher across all maturities, albeit to a lesser extent – around 15 to 20 basis points.
Inflation figures for July exceeded expectations, with year-on-year CPI rising to 3.8% and RPI to 4.8%. In August, CPI remained steady at 3.8%, while RPI moderated slightly to 4.6%. In September CPI came in again at 3.8%, which was lower than consensus expectations while RPI inflation was 4.6%. Market expectations for interest rate cuts by year-end 2025 have remained largely unchanged from the previous quarter. A 25 basis point reduction is anticipated by year end.
Credit spreads (versus swaps) have held near their levels at the start of the quarter: A-rated spreads just above 130 basis points and BBB-rated around 170 basis points. AA-rated spreads, however, have diverged slightly, increasing by nearly 10 basis points from approximately 100 to 110 basis points over the period.
