UBS Fixed Income-Global Rates Strategy _Rates Map - Macro thoughts after IMF ...-118353245

ab20 October 2025Global ResearchGlobal Rates StrategyRates Map - Macro thoughts after IMF meetingsInvestors expect further performance of risk assets on a better-than-feared global growth outlook. But we also see room for US and euro duration to perform as the market is digesting several large shifts. Both investors and policymakers are trying to understand the robustness of AI-related growth, the response of US inflation to tariffs, the impact of the Big Beautiful Bill, further US policy measures, changes in Fed leadership, and risks of global fragmentation and trade disruptions. Optimism on Europe has waned compared to April. There may be some upside risks to German spending in 2026 but there is less conviction on the multiyear fiscal outlook. The ECB is in a good place, but communication at the next outlook meetings could be more challenging. We remain long US 10y and see value in European duration.Powerful narratives at IMF meetingsIMF meetings can have powerful narratives, even if they do not last. The 2018 meetings were a useful reality check after 2017's strong rally in global risk assets. Hawkish sentiment characterized the October meetings in 2022 and 2023, with strong narratives on inflation and calls for higher policy rates. US10y rates traded higher around those meetings, but fell right after (Figure 2). Global growth - "Better than feared, but worse than needed"Compared to April, there was a sentiment of relief, even if 2026 could be eventful. The IMF MD said that the world economy is "better than feared, but worse than needed." US tariffs have not been as disruptive as feared, with limited retaliation and manageable disruptions in global supply chains. The consensus was that US tariffs and export controls are here to stay as policy instruments. Many also believed that the administration would continue to make adjustments. This happened already in the tariff relief program for automakers. Some of the discussions felt as a preamble ahead of the 31 Oct - 1 Nov summit at the Asia-Pacific Economic Cooperation. Some European officials were concerned about the sharp increase in Chinese exports and trade diversion, but the relative strength in the euro was seen as manageable, even if there were concerns about slowing growth in Chinese consumption.Policymakers now focus on AIAI is now a key theme with policymakers, and not just investors. The IMF warned that its valuation models show that risk assets are "well above fundamentals." The outlook for further circularity in AI deals and AI revenue growth are now conversation starters, but historic precedents are lacking. Meanwhile, the market capitalisation of the S&P 500 is approaching 180% of GDP, which is a high level, even if many companies driving stock higher are not at the P/E levels of at least 45 our equity colleagues associate with a bubble. US growth boost ahead of electionsInvestors think that US growth will get a boost from tax refunds under the Big Beautiful Bi