Stagflation Concerns Rekindled

Rising interest rates, renewed lockdowns in China, and multi-decade high inflation rekindled stagflation and recession concerns in April, says FTSE Russell’s ‘Canadian Fixed Income Insight Report – May 2022.’ It says global government bonds broadly retreated in April as markets priced in higher rate expectations, withdrawal of policy support, and lower growth. Central banks face the daunting task of curbing multi-decade high inflation without derailing the global recovery, juggling bloated balance sheets, inflation, and slow growth. Canadian credit spreads have widened amid mounting risk aversion with the Canadian yield curve almost flat at the long end.