Most central banks are towing a similar line in 2021 to the one they held throughout 2020 when it comes to monetary-policy commitments. With the exception of a handful, pandemic emergency policy remains the norm in the face of leading inflation indicators. This has led many investors to test central-bank resolve. As a result, most sovereign curves steepened significantly early in 2021.

Since March, though, widening has been limited. Prashant Newnaha, senior rates strategist at TD Securities, told delegates markets appear comfortable at the long-end points they have settled around since March. “There has been no sell-off of long-end bonds even with price pressure coming through. The market is looking more for direction at the front end of the curve,” he commented.

Andre Severino, London-based head of global fixed income at Nikko Asset Management, told the virtual audience that rates markets are in a state of consolidation, waiting to see whether inflation materialises. The US Federal Reserve’s stance is clear, he added: any short-term inflation is transitory and a result of supply-chain disruption.

In the weeks following the DCM Summit, further speculation mounted about possible US interest-rate rises in 2022. However, the Fed’s official policy guidance has so far remained unchanged.

The Reserve Bank of Australia (RBA)’s assessment of inflation in Australia is similar. Christopher Kent, assistant governor at the RBA, reiterated the bank’s expectation that “inflation is unlikely to be sustainably within its target band until 2024”. Chief among the contemporary drags on inflation is wage growth, which is yet to respond materially to supposed labour-market tightening. Kent said: “Wage growth in Australia is still very low. Until we see a persistent rise in wages growth, I do not think we are likely to see enduring inflation.”

The inflation debate may have moved sovereign curves significantly already in 2021. But it has yet to surface with a bias either way in the Australian sovereign’s investor relations.

Rob Nicholl, chief executive at the Australian Office of Financial Management, indicated at the conference that the sovereign debt manager has not received any strong signals from domestic or offshore investors for or against breakout inflation. He added: “In addition to this, we have no clear signal as to whether Australia will stand out relative to its peers – either favourably or unfavourably – in an inflationary environment.”