The mood is shifting

The Houthi rebels’ recent territorial gains in the Bab al-Mandab Strait have caused crude oil prices to rise, once again, thereby fuelling inflationary concerns. Fearing second-round effects, major central banks have raised their key interest rates. Additional interest rate hikes are likely to follow. Expectations of further key interest rate rises have also pushed up longterm yields. The rise is being further fuelled by growing concerns about spiralling public debt in many countries.

This makes it all the more remarkable that volatility has so far remained surprisingly low in several segments of the financial market, such as the high-quality credit sector or the foreign-exchange market. Reason enough for us to devote a special feature to this phenomenon in this latest issue of Capital Markets Compass.