Higher Inflation Does Not Preclude Lower Yields

UBS expects US Treasury yields to decline as headline inflation moderates toward 3.3% by year-end, enabling the Federal Reserve to begin easing. The firm also maintains a positive stance on global AI themes, specifically in European IT and South Korean memory chips.

Key Takeaways

• 1.Treasury yields are expected to fall despite near-term headline inflation spikes, driven by eventual moderation and Federal Reserve easing.
• 2.Quality bonds currently offer an appealing risk-reward as inflation risks appear less pronounced than market pricing suggests.
• 3.The European IT sector is favored due to strong AI-related demand and momentum in earnings per share growth.

Table of Contents

• From the studio
• Thought of the day
• What to watch: 13 May
• Caught our attention
• Market update
• Appendix
• Global asset class preferences definitions
• Risk information

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