We expect long-term yields to rise further

While long-dated government bond yields have risen quite a bit in recent months, we suspect that continued inflationary pressure and the prospect of tighter monetary policy means they still have some way to climb. We expect yields to rise by the most in the US out of the major economies, as inflationary pressures there still look the strongest. Meanwhile, higher yields may also help limit the upside for risky assets, such as equities and corporate bonds. And with economic growth slowing in many places and expectations for corporate earnings still high, further large gains in equities look unlikely to us in any case.