There is substantial disagreement in markets about the outlook for global rates in 2023, see chart below.
Looking at forward OIS curves shows that markets are pricing rate increases in 2023 by the ECB, the Riksbank, and the SNB.
In sharp contrast, markets are pricing that the Fed, BoC, and BoE will cut rates significantly in 2023.
Implicit in these forecasts are very different assumptions about inflation. In some countries, the expectation seems to be that inflation will soon reverse back toward the central bank’s target. In other countries, the assumption is that inflation will be a much more permanent problem that requires higher rates for much longer.
Normally central banks move in sync, and the bottom line is that several of these central banks seem mispriced. In particular, it seems highly unlikely that in 2023 the ECB will be hiking rates several times, and the Fed will be cutting rates several times.
Source: Bloomberg, Apollo Chief Economist. Note: Hikes and cuts are derived from the pricing of the forward OIS curve for individual countries using FWCV on Bloomberg.
This presentation may not be distributed, transmitted or otherwise communicated to others in whole or in part without the express consent of Apollo Global Management, Inc. (together with its subsidiaries, “Apollo”).
Apollo makes no representation or warranty, expressed or implied, with respect to the accuracy, reasonableness, or completeness of any of the statements made during this presentation, including, but not limited to, statements obtained from third parties. Opinions, estimates and projections constitute the current judgment of the speaker as of the date indicated. They do not necessarily reflect the views and opinions of Apollo and are subject to change at any time without notice. Apollo does not have any responsibility to update this presentation to account for such changes. There can be no assurance that any trends discussed during this presentation will continue.
Statements made throughout this presentation are not intended to provide, and should not be relied upon for, accounting, legal or tax advice and do not constitute an investment recommendation or investment advice. Investors should make an independent investigation of the information discussed during this presentation, including consulting their tax, legal, accounting or other advisors about such information. Apollo does not act for you and is not responsible for providing you with the protections afforded to its clients. This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any security, product or service, including interest in any investment product or fund or account managed or advised by Apollo.
Certain statements made throughout this presentation may be “forward-looking” in nature. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking information. As such, undue reliance should not be placed on such statements. Forward-looking statements may be identified by the use of terminology including, but not limited to, “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology.
