The fixed income landscape quietly navigates through a sea of persistent economic and political uncertainties, marking a subdued yet tense beginning to the summer.

US stocks recorded modest gains over the shortened trading week (markets were closed on Wednesday), with the S&P 500 hitting 5,500 intraday for the 1st time ever. The week also saw modest signs of rotation in the market, with value stocks outperforming growth as Nvidia suffered its first down-week in two months. Friday was a so-called triple-witching day, with roughly USD 5.5 trillion in options related to indexes, stocks and ETFs expiring. The start of the week brought some evidence of US economy easing with retail sales signalling less discretionary spending. But data released later in the week suggested that the economy was stronger than indicated by retail sales.

The SNB has lowered its key rate again today, to 1.25%, after the previous 25bp cut decided in March. This decision appears grounded in a combination of three factors: inflation is on a stable and moderate trajectory, economic growth remains soft and excessive upward pressures on the CHF may arise during the summer.. With this decision, the SNB has likely completed its monetary policy recalibration and is unlikely to cut rates further this year.. Should European or global developments trigger volatility and upward pressures on the CHF, the SNB will probably resort to interventions on the FX market to manage the impact on the economy, rather than use the interest rate lever.

Executive Summary: The Bank of England's Monetary Policy Committee meets on June 20th with expectations set for maintaining the current Bank Rate amid recent economic and inflationary developments. Despite a strong initial performance in June, the UK government bonds have stagnated since the last BOE meeting. • Watch This: The focus is on the number of MPC members supporting a rate cut (currently 2 out of 9) and any forward guidance regarding future rate adjustments. • Market Strategy: Preference for the short end over the back end of the UK government yield curve continues, as GBP strengthens amidst differing economic dynamics between the US and UK.

The Fed remains cautious, wanting more data before deciding on a rate cut, while newly released US CPI data provided relief for the markets and the rise of Rassemblement National result in snap elections in France. Each week, the Syz investment team takes you through the last seven days in seven charts.

Last week could have wreaked havoc on the U.S. bond market with CPI/PPI data and the Fed's decisions, but inflationary pressures are easing and the job market appears to be normalizing—a perfect mix for bond performance. However, Europe's outlook is darkening with a snap election in France.

The major US equity indexes ended mostly higher for the week, with the S&P 500 Index and Nasdaq Composite touching new highs. The market’s advance remained exceptionally narrow for the 2nd consecutive week, however, with an equally weighted version of the S&P 500 trailing its more familiar, capitalization-weighted counterpart by 2.15%. The AI euphoria continues to provide a continuing tailwind to tech-related stocks and growth shares, which outpaced value stocks by the largest margin since March 2023 (461 basis points). Another factor behind growth shares’ outperformance may have been reassuring inflation data and falling bond yields. US headline CPI inflation was flat in May for the first time in nearly two years.

The past couple of weeks have brought useful insights about the US economy. And although pockets of weakness, risks and uncertainties remain, while the Presidential election looms, the general situation today appears to be quite good for the world’s largest economy. Business activity remains clearly positive, inflation has resumed a slowing trend after a short-lived unexpected pickup, and the Fed has clear room for easing its monetary policy if needed but has no need to rush neither. The scenario of a smooth, soft landing, where inflation would gently converge toward the Fed target, growth would gently converge toward its long-term potential, and the Fed would eventually gently loosen its monetary policy toward a neutral stance, no longer appears to be a pipe dream.

• Political and fiscal uncertainty: the Rassemblement National's (RN) gains in the European elections introduce political and fiscal uncertainty into France's fixed income market. Key risks include potential policy shifts towards increased public spending, undermined investor confidence, and heightened market volatility. • Market reactions: immediate market reactions have already seen selloffs in bonds, with increased yields on French government bonds (OATs) and a steepened yield curve. Foreign investors are particularly concerned about capital outflows and the broader economic implications within the Eurozone. • Credit rating downgrade: the recent S&P downgrade highlights the need for careful monitoring of France's credit rating and its impacts on the fixed income market. • Future risks: if the RN performs similarly in the upcoming legislative elections, the risk to France's bonds could intensify, driven by potential shifts in fiscal policy and sustained political uncertainty

The US job market shows mixed signals, the ECB cuts rates and Nvidia overtakes Apple's market cap! Each week, the Syz investment team takes you through the last seven days in seven charts.