I'm eyeing the 5/95 ranges ... seems to me that European rates are loaded in one direction ...

And no growth/employment mandate ... so it may undershoot on inflation ... and if it does the ECB will have to cut rates ... perhaps faster than people think ...

Higher levels of CPI given tight labour markets, supply chain and geopolitical factors coupled with a very large (and potentially growing deficit) make it highly likely ... this is - however - going to mean that a lot of issuers will be faced with rising costs of debt if they wish to have long term financing in place ... which may mean they roll down the curve and finance short term more frequently than they might want to ... this means more liquidity risk in aggregate than we have seen in recent decades ... and adds some volatility and uncertainty to the capital markets mix ... and it will create some pinch points, inefficiency and opportunities - particularly in the parts of the market that need long term funding sources for capex intensive projects ... that banks and traditional capital providers will struggle to cope with ...

Lots of things to think about when allocating capital and designing strategies... particularly for those of us in private markets...

This chart shows how economists have been revising down their estimates CPI - they have consistently over estimated the levels of CPI as the economy has slowed ... although energy prices will likely cause a further spike in CPI as we roll into the year end ... and we continue to believe that a tight labour market across the region (and supply chain frictions) will put a more solid floor under CPI (relative to the post GFC period) ... it is very apparent that the economy is not as strong as its US counterpart and that it wil need some support - given burgeoning budget deficits in many states this seems unlikely to be delivered by significant fiscal easing ... so we think that adds a faster pace of monetary easing and thus a steeper curve ... this is good for banks and should help bring credit back on line ... which given the credit sensitivity of the CRE sector will provide a strong cyclical impulse to CRE ... that should lift CRE values .... spinning up this system takes abit of time so in our opinion it will show up first in 'seculars' where the operating fundamentals have strong thematic tailwinds supporting them ... and then ripple out into the 'cyclicals' ...