Group 1 - The assessment of "neutral interest rate" is a critical part of a central bank's monetary policy framework, influenced by factors such as productivity growth and demographic changes [1] - Schroders believes that the perception of how close central banks are to the "neutral interest rate" is more important than the actual level, as it affects their response to new data [1] - The European Central Bank (ECB) considers its current policy rate close to neutral, having halved its rate since mid-2024, while the market anticipates the Federal Reserve will reach neutral rates in the coming quarters [1] Group 2 - Schroders assesses a 60% probability for a "soft landing" of the US economy, with a 30% chance of a "hard landing" and 10% for "no landing" [2] - The current US Treasury yields have significantly decreased, reflecting market predictions of a 50% chance of a "hard landing" for the US economy [2] - The US labor market is currently stagnant, with companies adopting a cautious approach to hiring and layoffs, indicating high uncertainty [2] Group 3 - Schroders maintains that the necessity for further rate cuts by the ECB is limited, a view supported by recent statements from ECB President Lagarde [3] - The yield curve may steepen due to deteriorating supply-demand dynamics for long-term bonds, with slight upward movement in Eurozone bond yields expected [3] - Schroders is cautiously optimistic about certain investment opportunities, particularly in agency mortgage-backed securities (MBS), covered bonds, and emerging market bonds, while remaining patient regarding corporate credit [3]

Group 1 - The core viewpoint indicates that despite renewed focus on U.S. tariffs, there is insufficient reason to significantly adjust the baseline scenario probabilities, maintaining a "soft landing" outlook for the economy [1] - The probability of an "economic soft landing" remains high due to the resilience of the U.S. labor market, while the probability of an "economic hard landing" is adjusted down to 10% [1] - The U.S. labor market continues to show stability, with corporate profitability not being challenged, leading to expectations that unemployment rates will not rise significantly [1] Group 2 - The Eurozone economy is showing signs of stabilization and improvement, particularly with Germany's recovery being the most notable, suggesting a clearer path for Eurozone economic recovery [2] - The UK economy remains weak, with growth expected to be particularly sluggish in Q2 2025, but it is approaching a turning point for a potential rebound due to improving credit conditions [2] - The company maintains a cautious stance on long-duration bonds due to the lack of political will to address long-term national debt issues, increasing the risks associated with these bonds [2] Group 3 - The company has upgraded the rating for covered bonds, which are backed by high-quality loans, as their attractiveness increases relative to other European market bonds [3] - The outlook for various credit assets has been generally downgraded based on valuation considerations, as credit spreads are at historically low levels, reducing overall valuation appeal [3] - High-quality short-term bonds continue to provide the most attractive value, with a sustained preference for this asset class [3]