Macro Minutes
Return of the Living Spread
Feb 26, 2025
In this discussion, Blake Gwinn, Head of US Rates Strategy at RBC Capital Markets, and Peter Schaffrik, Head of UK/European Rates & Economics at RBC Capital Markets, dive into pressing economic shifts. They tackle the lingering uncertainties of tariffs and their influence on markets in the U.S., Canada, and Europe. The duo also examines the implications of the recent German elections on fiscal policy and coalition dynamics. With bond market weakness under scrutiny, they ponder the future of asset swaps and the regulatory landscape.
24:33
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Quick takeaways
- Lingering tariff uncertainty is significantly dampening market confidence and growth prospects across various economies, particularly the U.S., Canada, and Europe.
- Recent shifts in swap spreads due to treasury supply and regulatory changes reflect a recalibration of market expectations influencing bond performance.
Deep dives
Impact of Tariff Uncertainty on Economic Confidence
Uncertainty surrounding tariffs has significantly affected business and market confidence, creating a freeze in economic activity. Investors and businesses are becoming increasingly cautious, prompted by frequent headlines regarding potential tariff implementations. Sentiment surveys indicate a decline in optimism, contrasting the positive economic outlook that emerged post-election. As a result, even without actual tariffs being enforced, the climate of uncertainty is enough to dampen growth prospects and business investment plans.
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