Recession risk momentarily takes over

Editorial The performances of financial assets over the week speak for themselves and reflect the rising risk of recession: +42bp for the iTraxx Xover , -2% for the Euro Stoxx, -14bp for the Schatz 2Y with a 10Y Bund below 1.40%. This development is all the more surprising for the bond market given the publication of higher-than-expected inflation figures. While German inflation and the European core CPI fell on an annual basis, the overall inflation estimate for June reached a new high of 8.6% (vs. 8.1% in May). Against this backdrop, one can hardly imagine central banks being more accommodating in the near future, which points to an upward correction in interest rates, particularly for the shortest tenors, which are less sensitive to the risk of recession.