Generali Investments’ Post

Transcript

Hello everyone. My name is John Luca Bergamaschi. I'm the Head of Fixed Income Mandate Team and Portfolio Manager at Generally Asset Management. Today I would like to share with you my views on inflation outlook in Europe and what the latest Eurozone data mean for fixed income portfolios and ultimately for investors. So the upside surprise in May Eurozone headline inflation falls back to 2.5% year on year in June, in line with expectations. Core inflation remain unchanged at 2.9%, slightly higher than expected. The disinflation trend has slowed over the last month, but it's not been derailed. Services inflation remain quite sticky, but still in line with the projected path. Looking ahead at learning, inflation will actually approach 2% in October thanks to base effects and fall below the ECB goal in 2025. This was the first of the three inflation print before the ECB September meeting. A confirmation of the June ECB staff projection will most likely prompt another rate cut. Fixing a market volatility remain quite high in June, driven by growing political risk and then. Certainty over central bank monetary policies. French election in particular have been dominating the headlines in the past two weeks. After the first round, a hung parliament remained the most likely scenario, but tension will probably remain and impacted Golden Bond spreads. The 10 year bond yield is now back at 2.6% in the higher part of its recent range and roughly 60 basis points above its level at the beginning of the year. On the other side, inflation expectation in the euro area continue to decrease in June after the spike in April. The 10 year break even inflation level are now in line with the CPI gradually easing to 2% after today data. The bigger picture in the European monetary policy remains unchanged. We still expect inflation to falling off in the next month to enable the ECB to remove some policy restriction and continue its gradual. Is in Cycle 2, father 25 Basis point cuts in September and December remains our central scenario, supported by the recent drop in the Eurozone Pmis. In this environment, we prefer to maintain a positive bias on European fixed income. At current market levels, we see value in core rates, while we expect government bond spread to remain volatile due to political risk. Thank you for your time speak you soon arrivederci.