Will European Bonds Follow US Yields Higher?

Inflationary pressures are less in the eurozone and Japan, and their central banks and bond markets are still a long way from needing to follow the US lead

Peter Gee 22 February, 2018 | 8:00AM

European Central Bank frankfurt ECB inflation bond yields euro

The bond markets, particularly in the U.S., have played a key role in the recent global financial market volatility. In the US, the key benchmark – the yield on the 10-year U.S. Treasury bond – is now almost a full half a percent higher since the start of the year, having risen from 2.4% to just under 2.9%.

Other than in Japan, where monetary policy remains set on highly supportive, bond yields elsewhere have also risen: The 10-year government bond yield in Germany, for example, is up by a fourth of a percentage point to 0.7%, and in the UK, the equivalent yield is up 0.4% to 1.6%. The Swiss 10-year yield, which last year was negative, has moved further into positive territory. Investors in fixed interest have consequently faced difficult conditions.

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About Author

Peter Gee  is a Fund Analyst for Morningstar Australia

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