Speaker 1:
Hello and welcome to Macro Minutes. During each episode, we'll be joined by RBC Capital Markets experts to provide high conviction insights on the latest developments in financial markets and the global economy. Please listen to the end of this recording for important disclosures.
Peter Schaffrik:
Welcome back to Macro Minutes. Today is the 11th of April 2025, and my name is Peter Schffrik. We have labeled this edition Chaos Theory and I trust most listeners will not need an explanation to what inspired us. Market swings have been very large on the back and forth of the tariffs, culminating in a 90-day pause being announced yesterday, helping us to bring some order to the chaos. I'm joined by Blake Gwinn, RBC's head of U.S. rates strategy, and Elsa Lignos head of FX strategy. Let's get right into it. Blake, let's start at the beginning. Tariffs, escalation, now a 90-day pause. How do we have to think about this strategy, if you can call it that, and what are the economic impacts?
Blake Gwinn:
Oh, boy, Peter, where do we even start with this? It's been a pretty wild couple of weeks and that follows on what's already been a wild couple of months with tariff back and forth. I will say, there was a lot of, I guess, relief after the 90-day pause was announced, at least in markets. You saw what happened in risk markets with equities rebounding a bit. Obviously, that's unwound since then, but I look at what we got with that 90 day pause and still, if you think about what the trade weighted average effective tariff rate, it's not great if you would've gone back a month ago and told us that there was going to be a 24% average effective tariff rate, I still would've told you that's the highest in more than a century, and it's a much worse outcome than I think anything we'd been looking at for our base case coming into this year.
So, yeah, I didn't take quite as much comfort out of this pause. If I look forward, I do lean towards some further pullbacks for the rollbacks in tariffs. I think what we did see in effect this week is that there does look to be some Trump put. He clearly was swayed by what was happening in markets or the people around him convincing him, which they were probably moved by markets. So, it does give a little bit more credence to that idea of a Trump put. Maybe that takes a little bit of the edge out looking forward, and we can probably think that there's going to be further step backs, but we just don't know. There's really just a massive amount of uncertainty. I look at the fact that even speakers that are inside the cabinet, these very spokespeople for the administration, Besson, Lutnick, on a day-to-day basis, even they seem to be somewhat confused or get the rug pulled out from underneath them on things that they're saying around tariffs.
So, I look at that and say, what hope do we have here on the outside? So, just a lot of uncertainty, but I think at this point we are thinking about a base case that is a lot worse than what we were looking at in our prior forecast. Right now, our econ team is thinking about an effective tariff rate that's staying considerably above 10% for the next six months. That's as good a baseline assumption as any, still very low conviction, and I think that's probably going to evolve over time as we get more news, more headlines, more developments, but that's what we're working with right now. I will say, what that means for the outlook, it's not great. It's going to put upward pressure on prices. We're going to see some of that stuff pass through, but I'm almost more concerned at this point with not the direct mechanical impacts of the higher tariff rates, but what this injection of uncertainty because of the chaos and the recklessness, I would say, with which a lot of these trade policies have been rolled out.
And I would also extend that back to a lot of the DOGE moves that we had earlier on, like a month or two ago. The way that this process has happened I think has just really, as I said, injected uncertainty, injected this negative sentiment into C-suites, into corporations, into consumer psyches, and that toothpaste is really going to be hard to put back in the tube. So, even if we see those rollbacks that I'm talking about, even if we have a Trump put on tariffs and he ends up taking quote, unquote, deals from other world leaders to walk back these tariffs, that uncertainty piece doesn't really go away, and that is where I think we're really going to see that start to weigh on the data as we head into later this year. We are really looking at pretty significant drags, I think, on CapEx, investment, hiring as that softness we've seen in the soft survey-based data starts to leak or bleed over into the actual hard data. I think that's something we're going to see in the second half for sure this year.
Elsa Lignos:
So, Blake, you just changed your fed call and now see the Fed restarting the cutting cycle. Can you walk us through your thought process?
Blake Gwinn:
A big piece of it was what I was just outlaying there, that base case on tariffs getting worse, we think that's going to start to drag later in this year. I guess one way of putting it is just all of those, the path towards that optimistic scenario that we had come into this year where the second half was really going to be more defined by the tailwinds, deregulation in fiscal policy and that some of the worst inclinations on the trade side were really going to be curbed. The path to that outcome is gone. So, I think that with it, that requires some change to our thinking on the Fed. I will say, there are some timing aspects to it. The sequencing of how we're going to see the impacts of tariffs probably matters here.
I think the inflationary side of things is going to be much more mechanical, much quicker to pass through as we see corporations start to pretty quickly incorporate some degree of those tariffs into prices. So, you get that hit on the inflation side more immediately and then it really probably takes a little bit more time for some of that uncertainty and the chaos that I was mentioning before to really start to drag on investment on hiring, et cetera. So, you have the first shock of the higher price levels and then later on, starts to become more of a growth issue. That is one reason we're seeing those cuts that we put into our forecast horizon starting later this year. We have now a first cut in September meeting, the Fed cutting every meeting after that and that goes into 2026, although I'd be the first to tell you that the conviction level in 2026 is very, very low at this point.
All of the sentiment indicators, sentiment surveys and such have really shown a decline in the outlook for the us. I think the fed's watching that stuff, but this inflation problem is really kind of handcuffing them a bit. The other thing I would say is I do think maybe behind closed doors or maybe they're not as vocal about it, but I think there is something to an argument that New York Fed President Dudley made back in 2019, which is that the fed's probably a bit wary of encouraging or cleaning up the mess from bad trade policy. And I think there may be a little bit wary of doing something that will take some of the pressure off of the administration to change those. Now I know you're getting into some very, very dangerous territory with Fed independence here, which is partially why I say this happens behind closed doors.
A couple of things I'll just mention really quick about why we see that delay or why it's going to take a little while for the Fed to turn from their focus on inflation where it's at right now to getting forced into cutting by downside risks around growth and labor. It's worth noting that even before we start thinking about tariffs, the inflation outlook wasn't particularly fantastic to begin with. The Q4 data was showing a lot of stickiness. The early data in Q1 was a bit sticky. Now, we did have a softer than expected inflation data this week. It might provide a little bit of relief. But at the same time, inflation expectations, you look at survey measures and even to some extent market base measures moving up a bit, just not a great environment for the Fed. So, I think even if we had had nothing on the trade policy side, I think the Fed was still glued to the inflation side of the mandate right now and worried about those upside risks.
So, probably handcuffing them from really responding more strongly to any potential downside growth risks. They're really going to have to be coaxed out of that focus on inflation by accumulated hard data just showing that labor is starting to slow, the growth is starting to slow. The other thing I would say, and I don't think you're ever going to hear the fed say this out loud, but I do think whether very, very quietly amongst them or even subconsciously there is probably some hesitancy to bail out an administration for a bad trade policy. I don't think this is necessarily a bad thing. Former New York Fed President Dudley wrote an op-ed about this back in 2019 after he had left the Fed, that enabling or taking away some of the negative impacts of bad trade policy, or I shouldn't judge and say bad trade policy, but let's just say taking away some of the negative impacts of trade policy decisions in the near term may actually make things worse for growth and labor later on if that gives cover to pursue more bad policy.
So, I do think the Fed may be a little hesitant and they don't really want to jump in right away and negate a little bit of pain that may actually save things from greater pain down the road. And the last thing I'll say about that Fed reaction is that think about how big these swings in trade policy we've seen this week are. Trade policy is moving so fast that I think the Fed is probably just investors and everybody else, a bit frozen in place because if they respond strongly to the effects of these trade policies, they run the risk of cutting a bunch and then all of a sudden Trump removes all the tariffs and they're left off sides. So, I think they're even a bit frozen in place. And again, this is all why we see those cuts really not starting until later this year, but at some point, we do think those downside impacts will eventually force them to start cutting.
Elsa Lignos:
Yeah. Blake, you're talking about wild swings there, very much true to the title of this podcast, Chaos Theory, and those wild swings have been taking place all week. First, in equity and treasury markets and then now more recently in FX. But let's focus a little bit on the treasury market. What are your thoughts there on what's been driving it?
Blake Gwinn:
Yeah, Elsa, I think wild is definitely the right word to use there as is chaos. We've used that in several titles for pieces over the last few weeks. I think at least in my market, the thing that's really the biggest focus is what's been happening in yields. 10- year yields, we're up right now as of recording about 65, 66 basis points from the open this week in 10-year yields just a really wild swing. And that's even more eye-popping if you really look at what happened last week where we saw a very, very strong rally that was a huge move. We not only unwound that but even sold off further. So, really, some massive, massive moves in treasury markets. There's been a lot of other ancillary things happening as well, spreads, there's been a lot of talk of the basis trade. I'll touch on that a little bit, but I think just focusing on the move and yields itself is really where I'll spend my time here.
I think one of the predominant discussions around that, I think there's a lot of people potentially selling, there's a lot of flows going through, but I think one of the predominant themes that we've heard this week is around foreign selling of Treasuries, particularly focused on, I think, the official community, central banks, official monetary institutions, that comes along two tracks. I think there's a first track where you can think of this as potential retaliation or a potential tool I guess, or weapon to use in tit-for-tat tariff escalation with the U.S. Meaning, we do know that from the administration's own admission, they have been focusing a lot on the tenure yield level. They really want rates lower. So, if you really want to deliver some pain to the U.S. and try to gain a bit of an upper hand in those tariff negotiations, maybe you could start selling your treasury assets to push those yields up and gain a little bit of an upper hand.
That's a little bit different than, I think, the second track, which is really a broader de-dollarization of asset portfolios and just this idea that longer term foreign investors are shifting from what I would say are very long held overweights in U.S. Treasuries and moving those into other assets as those relationships grow a bit more antagonistic and start to have some doubts around the role of the dollar longer term. Whether it's that first one or the second one, there are some differing implications there, but the point is whether you're looking at foreign sales as a direct weapon to be used in the trade war or it's this broader shift away from the dollar, that is what has been driving a lot of the discussion this week.
Where are we on that? It's very tough to tell. Trying to prove foreign central bank selling, I often say it's somewhat like measuring a black hole. It's very tough to measure or see in any quantitative way in real time. So, you have to look at the ripples around it to try to get a sense of what's going on. To that point, the fact that we've seen such a strong sell off even as risk assets have been selling off as well, the moves that we're getting in currency markets, which I'm sure Elsa will discuss a little bit later, decline in swap spreads, all of this would be or could be consistent with foreign selling. All that being said, we don't have very convincing hard evidence of that yet. The treasury custody holdings of foreign central banks that are held at the Fed, we didn't really see much move in that this week.
That data goes through Wednesday afternoon, so should have presumably covered a lot of that. But I do say about that data, it can be used to prove that foreign selling has occurred. If you see those treasury holdings that foreign central banks have at the Fed going down, you could certainly say that they're moving out of those treasury positions, but if it doesn't go down, you can't necessarily prove the opposite. You can't say that if they didn't go down. Foreign central banks aren't selling Treasuries because those could certainly be coming out of treasury holdings that are custodied elsewhere, that aren't held at the Fed. So, we can't really prove or disprove anything from the very early data we've gotten out of the Fed. Obviously, you get some very lag data later on that can give you a better idea of what's happening there, but we just don't really have any hard proof or disproof that those are going through.
But if you look at the ripples around it does seem like it could be consistent with some broad selling by foreign central banks. One thing I would like to mention too, this discussion, especially as things really started to heat up midweek, it started to teeter into what I would say almost the early stages of dysfunction. There was a lot of concern that we were heading to a point where the unwind or a de-leveraging would take on a life of its own and we could be sliding into something that looks akin to a March 2020 type of market breakdown. So, a lot of discussion around whether or not the Fed would get involved, how they might get involved, some type of intervention there. That's where we were heading midweek. I will say that the treasury auctions that we had had the 10-year auction, the 30-year auction on Wednesday and Thursday respectively, both of those went very, very well and I think really avoided a deeper slide into that around dysfunction that both of those showed strong demand from the buy side, they were well-supported.
So, I think that calmed things down a little bit. That's not to say that the sell-off the market moves have really stopped, but I think at least what we're seeing is that the move is happening in a somewhat orderly fashion, especially when you compare it to something like March 2020 where there really was a much more full breakdown in market functioning. It wasn't just about the price level, the bid ask, the volatility, it was the fact that there was no bidder for Treasuries and the Fed had to step in and take the other side of that. So, still very different from that. Even if we see the sell-off continuing at least Friday, it seems to be happening a bit more calm, a bit more orderly than what we were seeing midweek. I think we have probably stepped back away from any type of trigger where we might see intervention from the Fed.
Now, that's not to say we don't come in next week if this continues and we do see that kind deleveraging event taking on a mind of its own, we could certainly get back towards that trigger. And I'm sure that conversation will stay in the ether for the next week or two until we see some stabilization in actual yield levels.
Peter Shaffrik:
Elsa, I think that's a very neat segue into currencies. Currency markets were calm, I want to use the past tense here, and not so much anymore. If I just look at today Eurodollar, I think at one point we were trading north of 114 with a broken downtrend in place since 2008, what do you think what's changed here?
Elsa Lignos:
Yeah, absolutely right, Peter. Up until yesterday, the main thing that stood out in effect was actually how little it had moved compared to other asset classes. But that feels like something has shifted and it's worth taking a step back because sometimes currency markets do overshoot and then sooner or later it feels like we'll trade back to where we were. But this does feel somewhat different. There are a few things that stand out to me and the first is that it's unusual to see bonds and the currency selling off together. That's really a hallmark of emerging markets, not G10. We did see it in the UK around the Truss episode where gilt and sterling were crashing together, but very, very unusual for the dollar. So, it is something that gives you pause for thought and surely some of the moves have been exacerbated by barriers in Eurodollar.
We saw that on the way down when we were trading lower through 103, 102, that certainly happened. The difference then was that nobody really expected us to trade sustainably below parity for any extended period of time. And so, those moves did eventually fade reverse, whereas now, it does feel like you've got a of long-term buyers waiting in the wings for any dip in Eurodollar to buy into or conversely any pop higher in dollar yen to sell into or pop higher in dollar Swiss to sell into. So, I do think there is something really worth watching. I really like the way Blake just raised it there. Measuring official institutions selling is almost like trying to measure a black hole.
So, what can you watch around the black hole to get signs that this is happening? You can look at other alternative reserve type assets. Gold is one that's very much in focus and the fact that gold is at all near the highs, again, somewhat points in that direction and then look at the correlation or the breakdown in correlation between the U.S. dollar and U.S. Again, I think that will be something very important to monitor going forward in a real time basis.
Blake Gwinn:
So, Elsa, that's a pretty bearish outlook on the dollar it sounds like, which I guess runs counterintuitive to at least my simple rates market understanding of how these things usually work. And I think what the consensus probably was coming into tariffs that this would all be dollar positive. So, I guess what's flipped there? What's changed?
Elsa Lignos:
Yeah, absolutely right. I pre-March say the consensus and I include ourselves in that was that tariffs would be dollar positive and on the grounds that it would hurt net exporters more than the U.S. And that's really turned into a very broad consensus of Trump as dollar negative. There are two channels to that and I actually went into a little bit more detail on this and a note we published earlier this morning. The first channel is the growth channel. So, this is the acceleration of expectations of an end to U.S. exceptionalism. And you can understand why that plays out as a dollar negative outlook. I think the challenge there is, as you yourself said in your earlier comments, the inflation outlook is a bit of an impediment to the Fed really delivering on aggressive rate cuts certainly in the near term. So, if it was just about the growth channel, then you could question how far the dollar weakness could run.
And certainly, that was my stance if you'd asked me earlier on in the week. But what we've seen in the last 24 hours or so is signs of the liquidation channel taking center stage, and that's this rotation out of U.S. assets into rest of world assets. That could be the private sector and also, as you were discussing earlier, the public or efficient institution sector. And that channel really plays out in a different way. I think the pace of dollar depreciation would be slower, milder for the growth channel. It's faster, potentially bigger for the liquidation channel. It's not something I think that you can call with certainty right now, but it does feel like even if Trump were to reverse everything tomorrow and at the moment his stance on China appears a long way from that, but it does feel like there is some scarring that's going to remain from this episode.
So, I'm just conscious that the way we've been thinking about the dollar is shifting in real time. And while the consensus is negative, we have seen a dramatic shift in positioning on the dollar. There's a lot of short positioning out there, but it's really very much tactical trades and fast money as opposed to the structural reallocation. Again, it's something that we've been looking at quite a bit this week. The speed of the move in FX, the way it's come in short, sharp bursts after the German fiscal announcement, then after the initial tariff announcement on April 2nd, and again in the last 24 hours suggest to us that we've not actually seen all that much in the way of big structural asset reallocation. There will be some large institutional investors that have done that, but if you think about the size of dollar holdings of overweight U.S. dollar holdings on the part of the rest of the world. And if we are seeing at least some of that unwind, then it's not going to be something that plays out in such a short timeframe.
That would be my concern. And again, we're watching this all unfold live in real time, and so it would be rash to try and make any bold predictions. But if I think about how that plays out into our currency views, we've long had a view that dollar yen was going to go lower in 2025. That was not even premised on a U.S. recession or the Fed aggressively cutting rates. It was really much more fundamental story of how hedging dynamics were going to involve. If I overlay the current uncertainty, then to me it feels like a fundamentally well-founded direction of travel for dollar and lower. My call for the end of next year was 120. How long that takes to play out very much depends on whether this is a real crisis of confidence or whether it's something not quite as malign. But again, I'd be most comfortable looking at those trades where all the fundamentals line up.
Peter Shaffrik:
Elsa, maybe if I can pick your brain on a very specific currency pair, what are we thinking about CAD here? Usually, it trades a bit as a risk proxy but not so much at the moment. So, what's your thought here?
Elsa Lignos:
Yeah, great question because this is one where Canada appeared to be in the crosshairs and actually, on April 2nd was led off really very lightly. And I think when you take a step back and think about the monetary policies that the Bank of Canada has delivered, consider the fact that we have an election coming up in Canada and a strong likelihood of some decent fiscal support coming after the election. It does feel like the Canadian dollar has somewhat turned a corner. And again, because this is not a classic risk off environment, this has tones of markets starting to question the dollar's role in the global order. It does mean that the Canadian dollar by extension is not trading as you might expect. We updated our forecast earlier in the week and changed it to a break of 140 in this quarter. I wasn't necessarily expecting that was going to happen just 48 hours later.
But I do think that the Canadian dollar actually has been through quite a bit of pain and now appears to be coming out the other side. And so, while it is still very much tied to the U.S. from a trade perspective, it's exposed to the U.S. if we see a material slowdown in growth there. You have had, as I said, a fair degree of monetary easing. You have the prospect of fiscal easing and that somewhat shields the currency from further weakness. Peter, let me turn the tables. Don't worry, I'm not going to ask you about Canada, but we have an ECB meeting next week and they will probably cut rates fine, but this is also the first opportunity they've had to present some thoughts on the tariffs and B, feels like a long time ago now, but the fiscal stimulus package, what are you expecting?
Peter Shaffrik:
Thank you, Elsa. I think it's a great question. Before I actually say something about next week's meeting, I think it's quite important to take a step back and recall that the ECB has almost always, even before we talked tariff and earnest looked at the glass rather half empty than half full. So, they clearly have an easing bias anyway. And the question before us is how easy will they see it? Clearly, if you look at the different components, the tariffs per se, they're clearly negative. The ECB has even given us, or Lagarde rather, has given us some sort of a numerical estimate for this. She said in a hearing at the European Parliament that a tariff at 25% would be worth not 0.3% negative on growth and retaliation would add that or would gross that up to negative 0.5. Clearly, we've got something that's a bit less than that.
So, I would think the ECB is probably penciling in a negative 0.2 just for the direct tariff impact. But clearly the whole market turmoil, financial conditions are clearly a tighter now that should probably add something to it. Juxtaposed against that I think are two different things. One is we have now significantly lower energy prices and that's one of the small positive outcomes out of the whole thing for Europe because we're net energy importers and that's a positive terms of trade shock. And then as you said in your question, the fiscal stimulus that so far, they haven't really baked into their forecasts either. Now we won't get forecasts at the next meeting. That will only come in June, but we might get a sense of that. We have just updated our forecasts and we think at the end of the day we'll probably still have some growth number of around 1% for this year, which is not a million miles away from where the ECB sees it at the moment and probably something like 1.3, 1.4 next year.
And the question really is how far the ECB is willing to go to the downside now as regards to the next meeting, they'll cut rates, that's for sure, and we think they will have to change their rhetoric somewhat as far as describing the policy stands. Last time round, they already said that we're significantly less restrictive. If they reduce rates further, that will probably amplify that, but I think it will leave a cutting bias in place. And that also then begs the question of where would the terminal rate be? We so far thought that the 2 25 rate where we'll be getting to next Thursday is probably going to be the end point of the cutting cycle, but we'll probably look at that with a fresh lens once we know how the ECB is interpreting things here.
Blake Gwinn:
Taking all that on board, let's layer in now the tariff outlooks. EU has already said that they're looking at some response to the U.S. tariffs, steel and aluminum, they rolled those out. How do you see the response evolving and how does that factor into your view on the ECB side?
Peter Shaffrik:
Yeah, thanks, Blake. First of all, one of the things that's clear to me what the preferred outcome is some kind of a negotiated outcome, and you can also see that. Yes, they have rolled out the counter tariffs to the steel and aluminum thing, but they've also rolled it back and they paused it alongside Trump's pause. That already tells you something. They're not really in the business of escalating things. However, what they have said is that there's probably four avenues and that they're considering as a response.
One is just a tit-for-tat, that's what we've seen sort of with a steel and aluminum thing. And they will leave that on the table very clearly. The second thing in my mind is probably the biggest bazooka that they have, which is escalation. So, there is a tool called the so-called ACI, the anti-coercion instrument, doesn't roll off the tongue very well. But essentially what it is it gives them a legal cover to do a whole range of things such as, for instance, curbing access to the European market for even service firms, putting levies on foreign firms and they have threatened to use that.
That would be a major escalation because it would bring the trade war to the service sector, which so far, we're not even talking about. Clearly, as the U.S. has a trade surplus in services with the EU, that could potentially be something that is quite powerful. That's the second avenue. The third avenue is where they have said that they would use proceeds from any of these actions to support the companies that are being, or the sectors that are being hit by the U.S. And that obviously would distort trade even further. And as the U.S. is trying to create a level playing field, that's obviously not very level playing field. And then fourth, going back to the beginning, the preferred option is to offer some concessions and reach a negotiated settlement. And they've already said that they would be interested in a zero for zero tariff environment, but so far, Trump has said that's not enough.
I'm not 100% sure ultimately where we're going to end up because I think that will depend a lot on the willingness of the U.S. to accept any negotiations. But I think that's the strategy that they have trying to come in and being the good partner but also, have a big stick in the back that they could potentially wield if push comes to shove.
Blake Gwinn:
Lastly, turning it back to the market side and just to run parallel, I guess with my comments earlier, obviously we've been seeing a lot of volatility that I was discussing earlier in U.S. markets, but we obviously aren't the only ones and there's certainly ripples across a lot of different markets. So, what are you seeing on your end of things, volatility and gilts and EGBs, et cetera? What are you seeing over there?
Peter Shaffrik:
Yeah, thanks, Blake. Let me actually start in the UK because the UK is trading relatively closely with treasury. So, obviously seeing treasury yields rising, which as we said earlier is not necessarily what you would expect and you see a very similar behavior here in the UK as well. Now I think one of the issues is that we have a central bank that has, as I was saying earlier, that the ECB was always looking at it glass half empty. Well, the comparison doesn't really work, but the Bank of England has always been more focused on the inflation angle, so you not necessarily expect a lot of support coming from these guys. Secondly, the UK has much less fiscal room than, let's say Germany for instance has as the issue of Bunds. And you can see that, you can see that in many ways.
And one of the ways, for instance where you see it is much less demand, particularly for the ultra-long end of the curve where we've seen quite a bit of underperformance and steepening on the curve. So, I think that's not helping either. I think Sterling or the gilt market is probably a little bit more pressured. Now, in Bunds, I think, particularly the story is quite different. And we talked earlier that we might've seen big flows from international accounts out of the U.S. into something else. And I think one of the something else could well be the Bunds because what we're seeing at the moment, particularly today is where Treasuries and guilds are rising, we're seeing Bunds performing at the same time as the Euro is performing. So, I think there's quite a decent chance that we see some of that.
But again, also what I said just now, Germany is one of the countries that has fiscal headroom and is unlikely going to be punished by markets for missing their fiscal targets or having high issuance because there's probably not enough Bunds around at the moment or going around at the moment to satisfy the demand. So, I think that's giving them a slightly special role. Last but not least, one of the things I would point out is that we've seen quite a bit of credit spread widening over here in Europe as well as we have seen in other markets, but obviously, in Europe we've got a somewhat special situation that we also have sovereign credit. Whilst that's not the epicenter of the current volatility by a long mile, and we've seen obviously much, much wider moves emanating out of Europe.
In years gone by, we did see some widening of let's say BTPs versus Bunds or OETs versus Bunds. Not to the level where it's currently problematic, but clearly, if things become even iffier than they are at the moment in spread markets more general, I think they're probably going to be dragged along to some degree. So, I actually think from a broader point of view, the Euro market at the moment is the least of our problems and we might even see some of the inflows, but that might well change. And I think if we want to focus or if we should be keeping a close eye on some of the other markets, it's probably more the sterling market in the gilt market than the EGB market for a change.
Blake Gwinn:
Thanks, Peter. Really, really interesting.
Peter Shaffrik:
I suggest we close it here. I think there was lots to talk about and I'm pretty sure with these market moves there will be lots to talk about in future episodes. I thank you Blake. I thank you Elsa for being on the show with me and I thank everyone for tuning in and hope you're going to join us again next time.
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