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'Natural' for global bond yields to rise from here, say strategists
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BENGALURU – Global sovereign yields will have only drifted modestly higher by this time next year, but most bond strategists polled by Reuters appear convinced the only way is up and the gap between short and long-term maturities is set to widen.
The latest quarterly poll results coincide with an unusually dramatic rise in Treasury yields following what most say is a decisive shift away from pandemic emergency policy by the world's top central banks and rising concerns about inflation.
Their reluctance to forecast anything more than modest rises in yields may also be a reflection of the years spent by these same forecasters predicting such a return to normal only to be flattened by relentless demand – led by central banks – for government bonds.
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But the sell-off in U.S. Treasuries this week that pushed yields up to levels not seen since mid-June suggests the government bond market is finally at an inflection point as investors realign their outlook with the Fed and other major central banks.
"Growth is above trend, inflation is high enough as of now and for the forecast horizon. With this kind of backdrop, it is but natural for interest rates generally in the developed markets to move higher," said Arjun Vij, portfolio manager of J.P. Morgan Asset Management's $1.15 billion Global Bond Fund.