UBS Fixed Income-Global Inflation Strategy _The Global Inflation Friday_ Gale-118478866

ab24 October 2025Global ResearchGlobal Inflation StrategyThe Global Inflation FridayUK disinflation arrives. Go with it: 5y5y to 2.75%.Expect CPI to rise by more than the fixings over coming months. OER weakness in September should not be extrapolated strongly. Data quality ahead is likely to be increasingly questionable. It could still be that no October CPI is produced, in which case extrapolation without the negative October seasonal may lift the reference index slightly for January cash flows. We continue to recommend to own short-end TIPS but do not have a recommendation on long-end this week. Feb-45s into Feb-42s looks interesting on RV. 10y (and 30y) TIPS are cheap compared to inflation swaps.In Europe we remain long breakevens. We do not have conviction relative to consensus on the October HICP for next week but expect higher prints over coming months than the market appears to.Lower UK inflation has arrived. We did not expect it as soon as this month, but we do expect disinflation to be sustained and pronounced. We continue to recommend short 5y5y RPI. 10y supply next week may help that to break the psychological barrier of 3%.Figure 1: View summaryviewexpressions / commentsUSBreakevenNeutral- Long Jul-26 TIPS b/eReal rateLong2s5s steepenerEuro AreaBreakevenLong- Long front end to 5y- Beta-breakeve front end trades still offer risk-reward but we pause with our prior recommendation having reached target.Stagnant Livret-A inflows with lower coupon to depress 10y-15y. Looking for evidence of structural demand long end given strong pensions positions across Europe.Real rateNeutralCountriesUKBreakevenShort- 10s30s RPI steepeners as preferred short expression- Short 5y5y RPI is a strategic positionReal rateLong- Long long endSource: UBSThe noise starts now for CPIWeaker rents drove a slower monthly CPI gain than expected in CPI in September, but we would be surprised if that carried over the coming months. The key points now are that we expect CPI to continue to pick up, driven by tariff impact on core goods, and that coming months' data may be of poor quality. Indeed, it may be that there will not be an October print. If the CPI is not produced, TIPS fall back to a monthly print which based on the monthly value of the previous y/y print (link). The October print is relevant for the calculation of cash payments in January. October is a moderately seasonally weak month, so uplifting by the y/y rate may result in a marginally higher October reference than otherwise expected, lifting the relevant January reference index.This report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 12. Interest RatesGlobalGiles GaleStrategistgiles.gale@ubs.com+44-20-7901 6066Reinout De BockStrategistreinout.de-bock@ubs.com+44-20-7567 0152Elena AmorusoStrategistelena.amoruso@ubs.com+44-20-7567 0239Global Inflation Strategy 24 October