European asset management giant: Bond market volatility is excessive, and market rate hike pricing presents a "valuable opportunity"

(1) Major European investors believe that even though soaring energy prices are pushing up inflation, the recent extreme volatility in the government bond market has already been excessive, disrupting previous expectations of interest rate cuts. (2) Amundi has purchased short-term UK and Italian government bonds, while Allianz Global Investors has increased its holdings of long-term UK government bonds. (3) After the outbreak of the US-Israel war against Iran, oil prices briefly approached $120 per barrel, and traders once bet that the Bank of England would raise interest rates next year (before the war, a rate cut was expected this month); after oil prices retreated, they heavily bet on a 50% probability of a rate cut before the end of the year. (4) The European Central Bank's expectations are similarly volatile: on Monday, bets were placed on two rate hikes in 2026 (last month, rate cuts were expected), and currently, the probability of a rate hike before December is priced at about 70%. (5) Amundi's Chief Investment Officer stated that central bank actions are premature, and the current market pricing for rate hikes actually presents an opportunity, with volatility mainly stemming from unwinding pre-war long bond positions. (6) The yields on two-year UK and German government bonds have risen by about 30 basis points. He believes short-term bonds are more attractive, has increased holdings of UK short-term bonds, purchased Italian short-term bonds, and sold 30-year long-term bonds. (7) Allianz fund managers have increased their holdings of 30-year UK government bonds (relative to US Treasuries), and still expect the Bank of England to cut rates in 2026, citing reasons such as a weakening labor market, easing inflation, and fiscal tightening.