The Fed raised the FFR by 50bps in May, the biggest increase in 22 years, to tame the 40-year high inflation rate. The short-end till belly of the UST yields closed lower in May in the range of 4bps to 17bps. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) rate, edged lower at 6.3% in April (Mar: 6.6%). Euro Area’s inflation rate peaked at a new high at 8.1% in May (Apr: 7.4%), driven by soaring food and energy prices. Consequently, core and peripheral government bond yields rose in May by between 8bps and 36bps. Yield surges were more pronounced on peripherals, especially Italian government bonds. In May, BoE increased the interest rate by 25bps to the highest level in 13 years to 1% to combat inflation fueled by high energy prices amid the Russia-Ukraine military conflict. Markets continue to price in another three rate hikes over this year. The yield premium between 10y CGB and 10y UST bonds has vanished in the past few months amid a hawkish move by the Fed to combat the surging inflation. In May, the yield premium shrank further by 11 bps, more than double compared with the 5bps in April.