All central banks are holding a monetary policy meeting in this last week of April. On Wednesday 29^th, the Federal Reserve will likely keep its key rate unchanged and future markets are still hesitant on the possibility for the US central bank to cut rate before the end of the year due to ongoing energy-led inflationary pressures (only a 25% probability of a 25bp rate cut by December 26). This is even though the Justice Department decided to end its investigation into Jerome Powell, removing a key obstacle to Kevin Warsh’s nomination as Chair. Indeed, Senator Thom Tillis has now dropped his opposition, paving the way for a confirmation by the Senate Banking Committee where Republicans hold a 13-11 majority. On the same day, the Bank of Canada will also hold its monetary policy meeting and is expected to keep its rate unchanged at 2.25% too.

The ECB will also likely keep its rates unchanged on Thursday 30^th, as policymakers have recently signaled caution amid heightened geopolitical uncertainty and despite rising inflation expectations. Officials including Yannis Stournaras and Gediminas Šimkus argue against a rate hike at the upcoming meeting, citing unclear economic fallout from the Iran conflict. Rate hikes might come later in the year, with future markets still pricing in almost three 25bp rate hike by December 2026.

On the same day, the Bank of England is also expected to stay on hold, amid dissensions within the monetary policy committee. Beyond this meeting, recent stronger-than-expected PMI data have pushed back market expectations toward more tightening ahead, with between two and three rate hikes now priced by year-end.

Today the Bank of Japan opened this “central bank week” with a decision to keep rates unchanged 0.75%. Interestingly, it was a split decision, with 3 votes in favor of an immediate hike but Governor Kazuo Ueda highlighted increased uncertainty to stay on hold for the time being. The probability of a rate hike at the June meeting stands at 66%.

Credit

Credit markets posted negative returns across segments, primarily driven by higher Treasury and Bund yields early last week, while credit spreads remained broadly stable.

The upward move in yields was partly linked to renewed oil supply concerns, which pushed Brent crude above $100 per barrel, as this added to inflation expectations.

Within EUR investment grade, real estate outperformed. In EUR high yield, chemicals sector posted the largest total return gain because Chinese chemical products cannot go through the Straits of Hormuz to Europe. Conversely, the transportation sector underperformed amid rising fuel costs.

European airlines are navigating elevated jet fuel prices, with jet fuel trading jet fuel trading at a significant premium to crude at above $200 per barrel due to widening crack spreads (the refining margin and logistics costs between crude oil and jet fuel).

Jet fuel costs typically account for 20–40% of airline operating expenses, but hedging strategies differ across carriers. Easyjet and Air France-KLM hedge against jet fuel costs while Deutsche Lufthansa hedges against crude oil and gasoil prices, less effective in periods of elevated jet fuel crack spreads.

Air France-KLM has further strengthened its fuel hedging policy from 68% to 87% over the next four quarters, while also raising long-haul fares and reallocating capacity toward Asia. On the other hand, Lufthansa just cut 20,000 short-haul flights for summer 2026 (or ~1% of capacity).

On the flow side, EUR high yield funds have staged a strong rebound last week, second consecutively weekly inflow after 7 weeks of outflows. EUR investment grade (IG) experienced outflows primarily on long-duration strategies. If rate volatility stabilises, inflows into EUR IG could resume.