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Answering your questions on our market forecasts

We held a Drop-In on Wednesday to discuss what the evolving outlook for monetary policy and global growth means for our markets forecasts. This Update recaps the key questions we addressed in the Drop-In and answers several of the questions that we received but didn’t have time to answer during the event.

24 June 2022

Bullion bonds are back

In response to the surge in gold imports to meet demand for a hedge against inflation, the government is relaunching the Sovereign Gold Bond Scheme, first introduced in 2015. By making it more accessible to retail investors, the scheme should have some success, but the impact on the current account deficit is likely to be small.
Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.

24 June 2022

We expect long-dated Treasury yields to resume their rise

While the yield of 10-year US Treasuries has fallen sharply in recent days, we doubt it has already passed its peak.

23 June 2022
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Gilts to struggle sooner, equities to struggle for longer

We haven’t changed our forecast that the Bank of England will raise interest rates from 1.25% now to a peak of 3.00% by the middle of next year. But we do now think that a number of other central banks will raise interest rates faster and to higher levels to try and get on top of inflation. As a result of these global factors, we now think that 10-year gilt yields will rise from 2.35% currently to a peak of 3.00% by the end of this year rather than to 3.00% by the middle of next year. We also think the FTSE 100 will fall from 7,050 now to a trough of around 6,600 by the end of next year (rather than to a low of 6,800 by the middle of next year). In other words, rises in global interest rates and the toll they will take on activity will result in the prices of gilts falling faster and UK equity prices falling further and for longer.

23 June 2022

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

22 June 2022

The case for a weaker renminbi remains intact

Although we now think policy rates in China will not be lowered further, we still expect the renminbi to weaken to 7.0/US$ this year. 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

The BoJ stands alone, for now

The BoJ left policy unchanged today but we suspect that it will ultimately modify its Yield Curve Control (YCC) framework before long. We think this could, at the margin, add to the upward pressure on government bond yields elsewhere. And we doubt the tweak would afford the Japanese yen much relief. 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

New forecasts for US Treasuries & the S&P 500

We think the sell-offs in US government bonds and equities have further to run, and have revised our forecasts for 10-year Treasuries and the S&P 500 accordingly. 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

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