- The record-breaking global bond market rally since the start of the year has fizzled out as mounting signs of persistent inflation force investors to reverse their views on the likely future path of interest rate rises.
- Investors rushed into fixed income in the first few weeks of 2023 as they became increasingly expectant that the US Federal Reserve and other major central banks would soon end their aggressive campaign of monetary policy tightening.
- A Bloomberg index tracking high-grade government and corporate bonds rose as much as 4 per cent last month, its best ever start to the year.
- The resulting rise in bond yields has also upset a rally in the stock market, with the S&P 500 losing 2.7 per cent in the past week.
- Futures markets, which had previously reflected bets that the US central bank would reduce interest rates twice later this year, now predict that rates will rise to 5.4 per cent by July, with at most a single cut by the end of the year.
Record-breaking global bond rally crumbles as fresh inflation fears grip investors
Fixed income markets reverse gains since start of year in ‘reality check’ over path of interest rates
Harriet Clarfelt
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