Analysis-Bond markets face a reckoning after stellar summer run
- Government bond markets, which have enjoyed a summer of solid price gains, now face a reckoning with their bets for speedy central bank rate cuts and slowing inflation, not to mention a tight U.S. presidential election.
Government bonds returned just 4% globally last year after 15% losses across 2021-22, and have returned 1.3% year-to-date."We have many indicators showing that the economy is not falling into a recession. We are just in a soft landing," said Guillaume Rigeade, co-head of fixed income at Carmignac. Economists polled by Reuters also expect roughly one move fewer than traders anticipate from the ECB and the Fed this year.
Bond markets have also been supported by easing inflation. Market gauges of inflation expectations recently fell to their lowest level in more than three years in the U.S. and their lowest in nearly two years in the euro zone. "Whatever the outcome will be, it will result in still high fiscal spending and large bond supply of U.S. Treasuries," said Capital Group investment director Flavio Carpenzano.
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