UBS Points to Easing Inflation Pressure as 10-Year BEI Falls to 2.25% on July 23

According to UBS Asset Management on July 23, core inflation pressure continues to ease, with June consumer price index data showing core inflation declining month-over-month for the first time since 2020. The asset manager noted that the 10-year inflation break-even rate (BEI) fell to 2.25% from 2.5% in May, while University of Michigan consumer surveys showed inflation expectations for the next year declined, with five-year expectations at their lowest level since March. UBS expects the Federal Reserve to gradually reduce its benchmark rate to 3% as disinflationary trends persist despite geopolitical tensions, predicting U.S. Treasury yields will decline in the second half of the year, providing attractive carry returns and potential capital gains for bond investors.
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