WS #15207

The macro environment is defined by a severe bond market selloff and a geopolitical energy shock. US Treasuries are suffering their worst quarterly performance since 1994, with UK 10-year yields hitting 6% and US long-end inflows surging as investors flee duration risk. Simultaneously, Brent crude has surged past $100 per barrel, driven by China's suspension of crude exports and escalating Middle East tensions, including a co-pilot attack on a Flydubai flight and Ukrainian strikes on Russian oil infrastructure. This combination of stagflationary pressure—rising energy costs and sticky inflation (Germany at 3.3%)—is forcing a repricing of rate expectations, with the Fed's Kashkari noting a wide yield gap and persistent consumer spending.