China/US sovereign yields could continue to diverge

We think the recent pattern of 10-year government bond yields heading down in China, but up in the US, will continue. Notwithstanding the strength of China’s PMIs released earlier today, our view is premised on our expectation that its economy will lose momentum later in 2021, while the opposite happens in the US economy.
Oliver Jones Senior Markets Economist
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Payrolls and the flattening Treasury yield curve

The ostensibly disappointing November US Employment Report released today has not dented expectations for near-term monetary tightening in the US at all, perhaps because of the growing signs this week that Fed officials have become more concerned about inflation. If policymakers are indeed determined to press ahead with tightening next year, even as the recoveries in the economy and labour market potentially slow, we could well see the Treasury yield curve flatten further.

3 December 2021

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We see little upside for developed market corporate bonds

Even if the global economy proves fairly resilient to Omicron, we don’t think that there is much scope for corporate bonds to perform better than government bonds over the coming years.

2 December 2021

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Omicron & Powell present risks to our Treasury yield view

The spread of the Omicron variant and Fed Chair Powell’s latest comments to Congress both present some downside risks to our view that the 10-year US Treasury yield will end next year some way above its current level.

1 December 2021

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Prospects for risky assets may not be so bright in H2

A rapid recovery in the global economy this year increasingly appears to be discounted in financial markets, and appetite for risk is clearly very strong. That is a key reason why we think that the second half of 2021 will be tougher than the first for most risky assets. At the same time, though, we sceptical of suggestions that we are currently in the late stages of a systemic bubble, of the kind which is bound to collapse under its own weight regardless of the macroeconomic environment.

5 July 2021

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Antitrust and the relative performance of big tech

US antitrust policy seems increasingly likely to become less friendly towards the very largest firms, especially the tech giants, before long. That possibility is one of a few reasons why we are not anticipating a repeat of the 2010s-style relentless outperformance of big tech in general over the next few years.

2 July 2021

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Why we doubt the equity rotation is over

We still expect the sector and factor rotation in the US stock market – which has faltered recently including since last week’s FOMC meeting – to get going again, albeit in a slightly altered form.

24 June 2021
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