Inflation in the UK soared above 10%. Markets react to such news more and more painfully.

In July, British inflation reached 10.1% after 9.4% a month earlier. It grew above expectations (the consensus forecast was 9.8%).

Usually in June, prices seasonally decrease in the UK. This month they have added 0.6% (mom). And this is despite the fact that gasoline is cheaper in July.

Food prices have risen by as much as 12.7% (YoY).

What does it all mean?

1️⃣ The Bank of England is likely to raise the rate by 50 bps at the next meeting. This is quite an aggressive pace.

2. Such unpleasant figures cause serious concerns that similarly inflation will continue to accelerate in other developed countries. In particular, in the eurozone.

The markets reacted emotionally, bond sales began and, accordingly, their yields went up.

The yields of British ten-year-olds increased from 10.1% to 10.2%. It is clear that the expectations of a more aggressive rate hike by the Bank of England.

Following them, the yields of European bonds also increased. For example, German ten-year yields have already risen by almost 10 bps. Moreover, yesterday their yields also rose by 10 bps.

▪️Even the yields of American ten-year treasury bonds added 5 bps on this news.

This is all very serious. Markets expect higher inflation and a tougher reaction from central banks. Therefore, even futures for America are trading in a moderate minus today. Let's see how things will be closer to the opening of the main trading session.

It's too early to say that inflation is on the decline. As we have already written, the previously observed positive still looks premature. The reaction of the markets to seemingly not the most important statistics on a global scale, it shows well today.

#public debt #inflation #markets

@bitkogan