Weekly Commentary: Central banks compelled to hold tight

Sticky inflation is leading major central banks to keep policy tight. We prefer emerging market debt as policy loosens and like short-dated bonds for income. Developed market short-term bond yields jumped after central banks signaled more rate hikes to come. We see rates staying higher for longer. This week’s PMIs will help gauge how much rate hikes have cooled activity. We already see signs that a mild recession has unfolded in the U.S. and euro area.