Global Rates: DM inflation markets under higher real rates

Tactical positioning at the front end of inflation curves remains the primary focus as global markets navigate rising real yields and resilient growth. In the U.S., the Federal Reserve’s hawkish stance stems from stronger-than-expected growth data, shifting the focus toward real rates rather than inflation breakevens. Euro area inflation remains heavily influenced by energy costs, yet the lack of significant pass-through to core services keeps intermediate inflation expectations stable. Meanwhile, the UK faces upward pressure on headline inflation due to energy bill adjustments, though front-end RPI appears cheap relative to current energy prices and SONIA. Across these regions, the interplay between geopolitical risks, commodity volatility, and central bank policy mandates continues to drive market repricing, with a cautious outlook on long-term real yields despite their historical highs.