In the weekly bulletin published on October 17 on his Substack, economist Mohamed El-Erian points to market behavior he describes as out of the ordinary. Three US macro readings — the consumer price index (CPI), the producer price index (PPI) and import prices — all came in above expectations in the same week, and yet yields on US government bonds fell rather than rose.

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

The bond market’s unusual reaction

The starting point of his analysis is the reaction in fixed income. 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 decline in yields came alongside a collapse in bets on imminent monetary tightening: «just as unusually, this was accompanied by a drop below 20% in the market-implied probability of a rate hike in October». For December, by contrast, the market continues to price a probability of a hike of around 90% — a figure the bulletin sets alongside Federal Reserve Chair Kevin Warsh’s refusal to signal the central bank’s next moves in advance.

Tech sells off and the “rotation trade”

On the equity side, the week brought another divergence: «the tech sector continued to sell off, dragging the Nasdaq down 4.5% on the week, the 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 about 2%. El-Erian also cites the case of CoreWeave, the company tied to cloud computing for artificial intelligence, whose credit spread touched 1,200 basis points, feeding the debate over whether this is an early warning sign of a tech bubble or an ordinary market excess due for 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 over the American cost of living ahead of the midterm elections, and a French spread over the German Bund steady between 130 and 140 basis points.

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

Why it matters outside the United States

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, including Italy’s BTPs (the country’s government bonds); oil above $110 a barrel, if confirmed, feeds through to energy and fuel prices in Europe 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.