Legg Mason

One key effect of the reduced borrowing may have been to encourage record low interest rates, both in the U.S. and elsewhere, as lenders attempted to reignite the borrowing cycle. while a slowdown in debt issuance drove up bond prices, pushing yields downward.

One way to look at low global inflation is as evidence of policy successes on the part of countries’ central banks — especially in Emerging Market (EM) countries, where inflation rates are often below their central bank targets.

Fed Chairman Powell reiterated the FOMC’s view of the economy as unusually favorable; Argentina has made some gains, courtesy of the IMF; Italy’s latest budget is still a work in progress.

Trade volumes, trade agreements, and tariffs have been the focus of capital markets over the last year. Capital markets have taken the existing unencumbered trade regime as a given, and priced in the continuation of the existing order of ever-expanding trade and lower tariffs that would benefit all parties involved.

Italy’s struggle to form a government and the threat of a new election have caused bond spreads to widen, signaling market concerns. Despite Italian bonds recovering, volatility is running high and investors need to ask whether there will be a contagion impact across Europe and the globe.