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The US and UK 10-year bonds yields rose 30bp to 1.8% and 1.3% respectively, while German bunds nudged into positive territory for the first time in just under three years. Credit spreads widened a little. Global equities fell 5% with ‘tech’ falling nearly 9%. Brent crude rose another 15% to $92 helping cushion the resource centric UK equity market which ended flat on the month. Gold closed down a touch at $1,796 and sterling eased to $1.34.

The US, EU and UK monetary authorities have been spooked by the rise in Consumer Price Inflation: initially a consequence of a disrupted goods supply chain this has morphed into an energy crisis and fears of a wage price spiral. The central banks have all adopted a more hawkish tone towards monetary tightening in recent weeks, both in the form and timing of quantitative tightening – the process by which prior asset purchases will be run-down as bonds redeem – as well as interest rates. The latter are expected to rise sooner and quicker than previously expected, albeit in absolute terms the numbers remain very low. Market pricing of rates has risen across the maturity spectrum and more so at the front end, flattening the yield curve. Having confounded markets in November by leaving rates at 0.1%, the UK MPC was the first to move raising rates in early February for the second consecutive meeting by 25bp to 50bp. With UK CPI likely heading towards a peak of 7% in April, the accompanying message not to panic seemed at odds with a Chancellor under pressure to offer relief from tax rises and ballooning energy costs.

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