MULTI-ASSET CLASS MONITOR HIGHLIGHTS

BoE rate cut hopes make Gilt yields plummet

British Gilt yields recorded their biggest weekly drop since April in the week ending October 17, 2025, as traders upped their expectations on how soon and by how much the Bank of England (BoE) will ease monetary conditions next year. The rally was ignited by remarks from BoE governor Andrew Bailey on Tuesday that the UK economy grew “under potential” and that the labor market was “softening.” Short-term interest rate markets responded by bringing forward the next expected rate cut from April to February, with a full 50 basis points of easing now priced in by the middle of 2026. 

Chancellor Rachel Reeves lent further support in an interview with Sky News on Wednesday, in which she gave her strongest indication yet that she would consider spending cuts as well as tax increases in her upcoming November budget. The 10-year benchmark yield ended the week 15 basis points lower as a result, falling to its lowest level since the end of July.

Please refer to Figures 3 & 4 of the current Multi-Asset Class Risk Monitor (dated October 17, 2025) for further details.

US banking worries weigh on the dollar

The US dollar lost 0.6% against a basket of major trading partners in the week ending October 17, 2025, as short-term interest rate expectations temporarily hit a 13-month low. The projected federal funds rate for December 2026 dropped to 2.835% on Thursday—a level last seen in September last year—amid worries about the health of the US banking sector. Two regional banks, Zions Bancorp and Western Alliance, disclosed tens of millions in losses tied to bad commercial loans and alleged fraud, sparking fears of broader credit quality issues and triggering a sharp selloff in bank stocks. But investors were quickly reassured by solid earnings from other major lenders, indicating that the issue was not systemic to the whole industry. The greenback still ended the week firmly in the red, with safe-haven currencies like the Swiss franc and the Japanese yen posting the biggest gains.

Please refer to Figure 6 of the current Multi-Asset Class Risk Monitor (dated October 17, 2025) for further details.

Stronger cross-asset correlations boost portfolio risk

The predicted short-term risk of the Axioma global multi-asset class model portfolio resurged by more than one percentage point to 6.2% as of Friday, October 17, 2025, due to a combination of higher equity volatility and a stronger co-movement of stock returns with FX rates and commodity prices. As a result, gold and oil saw their shares of total portfolio risk increase by 1.8% and 2.8%, respectively, but holding oil still reduced overall portfolio risk. US Treasury bonds neither added to nor subtracted from total volatility, as they decoupled from the stock market, while USD-denominated investment grade corporates recorded the biggest decrease in their percentage risk contribution from 4.2% to 2.7%.

Please refer to Figures 7-10 of the current Multi-Asset Class Risk Monitor (dated October 17, 2025) for further details.