In the weekly bulletin he published on October 17, 2026 on his Substack, economist Mohamed El-Erian describes market behavior he calls out of the ordinary. Three US macroeconomic readings — the consumer price index (CPI), the producer price index (PPI) and import prices — all came in hotter than expected in the same week, and yet yields on US government bonds fell instead of rising.

El-Erian is chief economic advisor at Allianz and president of Queens’ College, University of Cambridge, an academic post he was elected to after a long career as an asset manager (he was chief executive officer of Pimco) and economic advisor. He is one of the most closely followed voices on global markets, with a weekly bulletin that pulls bonds, equities, currencies, commodities and crypto into a single coordinated read: it is that cross-asset view, rather than any call on an individual market, that gives his commentary its edge.

The starting point of his analysis is the bond market’s reaction. El-Erian writes that «normally, three hotter-than-expected inflation readings would put upward pressure on government bond yields», but this time «yields fell despite higher-than-expected inflation on CPI, PPI and import prices». Even more unusual, in his view, is that the drop in yields came alongside a collapse in bets on imminent monetary tightening: «just as unusually, this was accompanied by a fall below 20% in the market-implied probability of a rate hike in October». For December, by contrast, the market is still pricing a probability of a hike of around 90% — a figure the bulletin sets alongside Federal Reserve Chair Kevin Warsh’s refusal to telegraph the central bank’s next moves.

On the equity side, the week brought another divergence: «the tech sector kept selling off, dragging the Nasdaq down 4.5% on the week, its worst performance since June», while, «illustrating the cause and effect of the rotation trade», the Dow Jones closed the week in positive territory. The S&P 500 lost roughly 2%. El-Erian also cites the case of CoreWeave, the artificial intelligence cloud company, whose credit spread touched 1,200 basis points, feeding the debate over whether this is an early warning signal of a tech bubble or an ordinary market excess due for a correction.

Across the rest of the markets, the bulletin records Brent crude above $110 a barrel and WTI above $100, the VIX volatility index up to 20, gold down to $4,187 an ounce, the dollar index (DXY) at 101.8 and bitcoin at $81,532. On the geopolitical and European front, El-Erian points to tensions between the United States and Europe over Ukraine, the stalemate on the Iran file, concerns about the American cost of living heading into the midterm elections, and a French OAT spread over the German Bund holding steady between 130 and 140 basis points.

But the most analytical passage in the bulletin is his reading of the rotation out of tech: «the rotation out of technology may not be as linear as many suggest», he writes, because the health of the rest of the market may depend more tightly than is generally assumed on the very economic and financial role technology has taken on across the whole capital market.

It is worth remembering that the transmission channel toward Europe runs on several fronts at once. A weaker dollar (DXY at 101.8) and falling US yields tend to ease pressure on global rates, BTPs — Italy’s government bonds — included; oil above $110 a barrel, if it holds, feeds through to energy and fuel prices in Italy as well; and a VIX at 20, while far from alarm levels, signals rising volatility that typically carries over to European equity markets in the sessions that follow.

Editor’s note

This article was originally published in Italian on money.it by Ufficio Studi Money.it on October 20, 2026 as «L’inflazione Usa sale, i Treasury non reagiscono. Il paradosso che spiazza i mercati spiegato dall’economista El-Erian». It has been translated and adapted for an international audience by the Money.it International desk.