20
Jan
Inflation will support the rise in bond rates in 2017
Trend reversal in long-term interest rates. Clear return of inflationary expectations. Higher yields in the US and emerging markets. Stay cautious regarding increases in Europe.
Key points
- The election of Donald Trump hastened the end of the global bond bull market
- The shift in global expectations has caused a generalised increase in long-term interest rates around the world
- This strong correlation among interest rate markets is likely temporary but will strengthen
- In 2017, rising inflationary expectations will drive up long-term rates
- The swift upswing of long-term rates could slow the pace of the Fed’s interventions in 2017
- President Trump’s programme will not have a material impact on the real economy until the second half of the year
- The monetary policies of the ECB and BOJ will be less accommodative in 2017
- The outlook for emerging bond markets is still positive
