Reuters file photo: US businessman works on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, September 2, 2021. Reuters / Andrew Kelly
Written by Hari Kisan
BENGALURU (Reuters) – Global sovereign yields are expected to decline only slightly by this time next year, but most bond strategists surveyed by Reuters believe there is only one way and the gap between short and long term maturity will widen.
The results of the latest quarterly survey show an unusually dramatic increase in Treasury yields following what is said to be the removal of the world’s top central banks from the epidemic emergency policy and raising concerns about inflation.
Their reluctance to predict anything other than a slight increase in output may also be a reflection of the years spent by these same forecasters, predicting a return to normalcy by the central bank-led uninterrupted demand for government bonds.
But the sell-off in the US Treasury this week boosted production levels that have not been seen since mid-June, suggesting that the public bond market is finally at a confusing stage as investors reconsider their outlook with the Fed and other major central banks.
“On top of the growth trend, inflation is still high and high enough for the forecast horizon. Against such a backdrop, it is normal but normal for interest rates to rise in developed markets,” said Arjun Biz, JP’s portfolio manager at Morgan Asset Management’s ১ 1.15 billion global bond fund.
“The Fed and the markets are very close when the first rents go up. That’s the pace of hiking,” Biz said, adding that there are opportunities to close market gaps.
The results of the September 2-2-2 survey, optimistic economic outlook, 26 out of 50 analysts, emphasizing a 52% majority, said the two-year and 10-year treasury expansion in the United States over the next two years was a possible outcome.
Although 11 said the spread would remain fairly stable, the remaining 13 gaps were predicted to shrink.
(Reuters poll graphic on major sovereign bond yields: https://fingfx.thomsonreuters.com/gfx/polling/myvmnowwgpr/MicrosoftTeams-image%20(21).png)
In the survey, more than 60 bond strategists predicted that the benchmark yield on the U.S. 10-year note would increase by 1.9% in 12 months, which is about 40 basis points higher than it is now.
Benchmark yields in Germany, Britain and Japan were forecast to move closer to 10 to 20 basis points at the same time.
(US Treasury Reuters Poll Graphic Outlook Outlook: https://fingfx.thomsonreuters.com/gfx/polling/xmvjokxxkpr/MicrosoftTeams-image%20(12).png)
But there was no obvious sensory deficit among analysts that would drive major sovereign yields in the short term.
Of those who answered a separate question, 24 out of 49 said incoming economic data would have the most impact, while 23 chose central bank forward guidance and the other two said the Covid-19 development and the U.S. debt limit are in dispute.
“We think the decline in Fed asset purchases … could have a minimal impact on the market at this stage,” Rick Ryder, chief investment officer at Global Fixed Income, told Blacker (NYSE), referring to expectations of a $ 10 billion cut in U.S. Treasury purchases and its current. 120 5 billion deducted from 120 billion monthly purchases to mortgage-backed securities.
“This is partly because the Fed has done a good job of telegraphing when tapping is likely to start, but more importantly because of how large fixed-income markets are in today’s context, asset purchases are likely to be negligible and income demand has become irresistible.”
(Reporting and polling by Prerna Bhatt and Tushar Goenka; Editing by Ross Finlay and Steve Orlofsky)