The US-Iran war looks to have resumed in the first days of July adding upward pressure to Treasury yields via higher inflation expectations. Even prior to these developments we have been expecting Treasury bond yields are likely to remain higher than prior to the conflict as inflation rates are rising. Data released in June showed that Core PCE (the Fed's preferred inflation measure) rose to 3.4% continuing an upward trend which began in June 2025. New Fed Chairman Kevin Wars

Political and geopolitical instability dominated financial markets in May. The decimation of the ruling Labour party at local elections paved the way for a leadership contest in the UK. Hard left candidates circling Prime Minister Kier Starmer's stoked an already twitchy bond market and pushed the UK-US 10yr spread ('moron premium') towards financial crisis-era extremes. Meanwhile hotter than expected inflation prints in the US are pushing the Fed under newly instated Chairma

In April credit spreads compressed from post-Iran invasion highs. Subordinated financials - a area we are overweight - was the top performing sector in our universe as spreads fell 20% in the month versus 12% and 15% for US IG and HY indices. Being deeply subordinated spreads started from high levels leading to a return of 3.7% in April alone compared with 0.45% for our investment grade benchmark. Outperformance is a symptom of the asset class. Highly rated, systemically impo