The Case For Quality Bonds Remains Intact Despite Higher Inflation

UBS maintains a positive view on quality bonds to anchor portfolios amid volatile inflation and shifting central bank policy. The firm has downgraded the European IT sector while continuing to monitor China's localized AI infrastructure investment plans.

Key Takeaways

• 1.US inflation rose to 4.2% in May, but UBS maintains that short- to medium-duration quality bonds remain an attractive investment.
• 2.UBS downgraded Eurozone IT sector to Neutral due to excessive valuations and headwinds from higher energy prices.
• 3.China is planning a CNY 2tr infrastructure spend to localize AI development and data center infrastructure.

Table of Contents

• From Circle One
• Thought of the day
• What to watch: 11 June
• Increasing growth risks should become a focus for policymakers, including the European Central Bank
• The robust portfolio income from quality bonds should prove defensive in the current environment
• Caught our attention