The Macro Report | June 2018

Italy’s Political Opera

Italy’s Giuseppe Conte was sworn in to power in early June to head a new populist government — made up of an unlikely marriage between the anti-establishment 5-Star Movement (M5S) and the far-right League party. The oath ceremony ended a three-month-long political opera in the eurozone’s third largest economy. The inconclusive March elections, the political chaos in forming a government, and the anti-euro leanings of the coalition rattled Italian and global financial markets. The country remains vulnerable to high interest rates, high debt levels, and very low growth.

As Italian markets tumbled, global interest rates continued to trend higher. The yield on the benchmark 10-year U.S. Treasury crossed the 3% psychological barrier, setting a new five-year high. It signaled that higher rates are afoot in the world’s biggest bond market as the Federal Reserve tightens monetary policy. Higher oil prices, which have raised concerns about inflation, will be driven by supply factors, including the possibility that OPEC will boost output in the second half of the year.

Interest-rate ripples

Interest-rate ripples

The yield on the 10-year Treasury has crossed the 3% psychological barrier, signaling a steady rise in global rates and posing a challenge for riskier assets.

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Spotlight on oil

Spotlight on oil

The global supply and demand balance of oil is improving, while OPEC mulls boosting output in the second half of 2018.

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About the macro report

The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.

Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis

Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis

Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics

Sterling Horne, Analyst
Politics and economics

Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting

Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics