WS #15211
The US economy is proving more resilient than anticipated, with Q2 GDP revised up to 2.2% from 1.5%, suggesting that inflationary pressures may persist longer than the cooling PCE data implied. This growth surprise is occurring alongside a severe stress test in European fixed income, where the UK 30-year gilt yield breached 6%, a level not seen since 1998. The divergence between a strong US economy and a distressed UK bond market raises the specter of global capital reallocation and pressure on US Treasury yields, complicating the Federal Reserve's path forward and potentially capping multiple expansion for rate-sensitive assets.
US GDP Revision and Bond Market Stress
The US economy is proving more resilient than anticipated, with Q2 GDP revised up to 2.2% from 1.5%, suggesting that inflationary pressures may persist longer than the cooling PCE data implied. This growth surprise is occurring alongside a severe stress test in European fixed income, where the UK 30-year gilt yield breached 6%, a level not seen since 1998. The divergence between a strong US economy and a distressed UK bond market raises the specter of global capital reallocation and pressure on US Treasury yields, complicating the Federal Reserve's path forward and potentially capping multiple expansion for rate-sensitive assets.