What Next for Global Bond Markets?

With the market pricing in a Fed rate rise in December - and a Bank of England rate rise before the end of the year, we look at the outlook for global fixed income

Morningstar 21 September, 2017 | 9:21AM
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The biggest influence on global bonds in recent weeks has been the tension over North Korea, which has led during more nervous periods to “safe haven” buying of government bonds.

In the US, for example, the yield on the benchmark 10-year Treasury note had been trading around the 2.25% mark in the first half of August, but got as low as 2.04% on September 7. There were similar North Korea-induced declines in other major bond markets, with the yield on the 10-year German government bond falling to a low of 0.30%, also September 7, and the yield on the Japanese equivalent dropping below zero, September 8.

More recently the bond markets appear to have become somewhat less worried about North Korea and yields have risen again with, for example, the US benchmark yield now just under 2.3%, not quite back to its levels before the tensions emerged. Whether the more relaxed mood will persist is unclear. With potentially more on the missiles horizon, has led to modest capital gains for bonds.

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