With inflation at 8.9%, Europe bond rally at risk of complacent market

With the worst yet to come in Europe, strategists say policy makers may hike more aggressively than many expect, upending a bond rally that some say has gone too far

Fund managers are warning the market is turning complacent over the outlook for inflation in Europe, where the prospect of recession has stoked the appeal of sheltering in bonds. 
 

Government debt has staged a strong rally from lows set in June as the economic outlook darkens and fears over surging consumer prices take a back seat. But unlike in the US, where the latest print showed inflation slowed, a second reading of euro-area CPI this week will likely confirm inflation accelerated to a record 8.9 per cent. Markets are pricing a peak of about 10 per cent in September, according to