Global Private Banking Developed Markets: overweight with a focus on carry opportunities at the short-to-medium end of the corporate credit curve Following the repricing for tighter monetary policies and the high level of DM real rates, which are almost back to pre-2008 levels, we believe it is right to hold a mild overweight for bonds and a modest underweight in equities. But the uncertainty around the global economy and central banks’ inflation fight “at all costs”, force us to be cautious in our bond allocation, especially when considering that the Federal Reserve has already hiked interest rates to a restrictive territory. Consequently, we reduced our long-held underweight position in DM government bonds, which represent the safest part of our bond allocation and serve as a diversifier to risk assets (i.e. their returns function generally counter-cyclically). Another supportive argument is the differential between US Treasuries and the S&P 500 earnings yield, which is at its tightest since 2007, making bond valuations more attractive on a relative basis. Finally, with a 5% Fed funds peak rate now priced in by markets, we also believe that a peak in DM bond yields rates is not too far away. Some DM rates may have even seen their peak already: this might be the case in the UK, where the BoE met market expectations with an outsized 75bp hike to 3% in November, but struck a distinctly dovish tone. This supports our view that the end of tightening cycle is very close and Gilt yields may have 29