UK Gilts Overvalued

UK gilts are overvalued, currently yielding only 1%. The UK has seen a boom in consumer credit in recent years, with rates around 10% YoY in the main categories of consumer lending (top chart). Rising inflation has pinched wages, with the result real wages are now...

EURGBP: Deteriorating Rate Differentials

(from our Weekly Update of 14th February 2017) Rising inflation in the eurozone is driving real rates lower, widening the rate differential between the EUR and other DM currencies. We look at risk-adjusted real-rate differentials by dividing real-rate differentials by...

Long-term Real Yields’ Decline Implies Stagflation

Yield curves almost everywhere have been flattening.  At the long end of yield curves, bonds have been rallying all year.  This is to be expected in Europe, where growth remains lacklustre, inflation is very weak, and the ECB is firmly in easing mode.  However, even...