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We now expect higher and earlier peaks in bond yields

We now think that the yields of 10-year developed market government bonds will peak earlier and, in some cases, at higher levels than we previously expected. That reflects a view that tightening cycles in many DMs will be more front-loaded and aggressive than we previously thought. Markets Drop-In (22nd June, 10:00 ET/15:00 BST): Join our Markets team for this special briefing on the outlook for equities, bonds and FX and a discussion about revisions to our forecasts. Register now
Franziska Palmas Markets Economist
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More from Global Markets

Global Markets Update

What a Taiwan Strait crisis could mean for markets

While China-Taiwan tensions haven’t yet caused ructions in global financial markets, any escalation that threatened to disrupt trade and/or financial flows almost certainly would. This Update explores the potential ramifications of such an event across bond, equity and FX markets. Markets Drop-In (9th Aug): Chief Markets Economist John Higgins leads this 20-minute briefing on our latest quarterly Outlook reports from our Global Markets, Asset Allocation and FX Markets services. Register now.  

5 August 2022

Global Markets Outlook

We think the latest asset price rallies will prove short-lived

We doubt the recent rallies in global bond and equity markets will be sustained over the remainder of the year. While we no longer think the 10-year US Treasury yield will exceed its June peak, we still expect it to rise as the Fed delivers a bit more tightening than investors now seem to anticipate. And we think government bond yields elsewhere will increase for similar reasons. We expect that, combined with a deteriorating economic backdrop, to place renewed pressure on “risky” assets; we forecast major benchmark equity indices – in both developed and emerging markets – to fall further this year, and expect corporate bond spreads to widen. But next year we think both “safe” and risky assets will fare a bit better, as central banks transition to easing mode and the economic backdrop starts to improve.

3 August 2022

Global Markets Update

A brighter outlook for EM local currency bonds

We continue to expect the yields of 10-year emerging market (EM) local currency (LC) sovereign bonds to rise over the rest of 2022. But we anticipate smaller rises than we did previously, given our downward revisions to our Treasury yield forecast, and expect most EM LC yields to decline, on net, by end-2024.

1 August 2022

More from Franziska Palmas

Capital Daily

ECB emergency meeting not enough to contain spreads durably

Euro-zone “peripheral” spreads have narrowed significantly on the back of today’s emergency ECB meeting, but we think that they will resume their rise before long. Markets Drop-In (22nd June, 10:00 ET/15:00 BST): Join our Markets team for this special briefing on the outlook for equities, bonds and FX and a discussion about revisions to our forecasts. Register now

15 June 2022

Global Markets Update

New, higher forecasts for EZ bond yields and spreads

We are raising our forecasts for euro-zone 10-year government bond yields and “peripheral” spreads to reflect the ECB’s further hawkish shift as well as its apparent unwillingness to commit to a strong backstop for peripheral bond markets.  

10 June 2022

Capital Daily

Hawkish ECB much more concerning for BTPs than Bunds

While the yields of 10-year government bonds have risen across the euro-zone after the ECB sounded particularly hawkish at its meeting today, we suspect that further upward pressure on “core” yields will be limited. In contrast, the lack of details on plans to prevent fragmentation further raises the risk of a disorderly sell-off in “peripheral” bonds.

9 June 2022
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