UK

With much fanfare, President Trump and Prime Minister Starmer announced a “historic” trade deal between the US and UK on Thursday.

April was one of the most volatile months across financial markets in recent memory, triggered by President Trump’s sweeping tariff announcement on April 2. While much has been written about the geopolitical and economic implications, here we will focus on how equity, credit and rates markets have adjusted following what was a sharp sell-off and subsequent recovery.

With the recent economic spotlight dominated by President Trump’s rhetoric and Germany’s blockbuster fiscal expansion plans, Wednesday brought the UK back into focus with the latest round of inflation data and the Spring Statement from the Chancellor, Rachel Reeves.

With the UK’s Office for Budget Responsibility (OBR) set to publish its updated economic and fiscal outlook on March 26, we are starting to see headlines concerning potential changes the Labour government could make to its budgeting plans in response to shifting forecasts.

Last week, risky assets continued to experience a somewhat volatile period. The tone was generally a risk off one, with correlations between risk free and risky assets back to negative.

The recent rally in European fixed income has partly been driven by improved economic sentiment, falling inflation expectations, and a more accommodative monetary policy outlook from the European Central Bank (ECB) and the Bank of England (BoE).

Global rates markets rallied sharply on Wednesday after fixed income investors received some long-awaited good news in the shape of Consumer Price Index (CPI) data for December, which came in below consensus in both the US and the UK.

Last week Fitch Ratings published a report concerning asset performance deterioration in UK residential mortgage-backed securities (RMBS) originated prior to the global financial crisis (GFC).

Last week’s rise in UK government bond yields prompted the bonds of UK financial institutions, both banks and insurers, to underperform other regions, a trend also seen in the equity market.

We saw a sell-off across the UK Gilt curve on Wednesday with yields rising by 4bp at the short end and 11bp at the long end. This took the 10-year Gilt to 4.80% and the 30-year Gilt to 5.35%, with the latter bringing the unwelcome headline that UK borrowing costs are at their highest since the last century.

Primary market and trading activity may be declining as is typical in late December, but macro data doesn’t sleep, and central banks haven’t got the memo on the wind-down into year-end either with policy meetings at the Federal Reserve (Fed) and the Bank of England (BoE) scheduled for Wednesday and Thursday respectively.

With a macro backdrop of falling rates and solid global growth, TwentyFour Asset Management's Eoin Walsh says fixed income investors can expect healthy total returns in 2025.