Recent crises within US regional banks and the more idiosyn- cratic case of Credit Suisse have various underlying causes. However, the overall context of these issues is undoubtedly the sudden and significant tightening of financial conditions in the past year.
In light of what continues to be a rollercoaster year for bond markets, we asked some of the fixed income portfolio managers around the Generali Investments ecosystem to answer this key question:
“Where are we in the rate hiking cycle, considering inflation on one side and the banking crisis on the other, and how are you positioned for the road ahead?”
After the turmoil in the banking system, the rate hiking cycle is likely nearing its end. The market has abruptly realized that higher rates can destabilize the financial system. Central banks now need to carefully manage this aspect of monetary policy, in addition to inflation, to prevent an economic recession.
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