Growth is slowing, inflation is coming down and these trends will accelerate in 2024 due to the impact of global monetary tightening. Therefore, in Q4 2023/Q1 2024, we will have to add duration and yield curves will enter a bull-steepening episode. Investors should price in more rate cuts as the growth picture deteriorates. In this sequence, timing is essential.

We expect Central Banks to be done with rate hikes. Investors are assuming the Fed and fellow Central Banks are unlikely to cut rates quickly amid sticky inflation.

However, the US economy has surprised with its resilience in recent months despite the steepest rate increases in decades. The market adjusted higher the equilibrium level of rates that the economy can tolerate. Many new factors are changing the game: the labour market, fiscal policy and a decade of low rates.

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