Global yields at 2009 highs signal the end of the interest rate cutting cycle

Today 5:19 p.m

Global bond yields have risen to invisible levels since 2009 in advance of a key Federal Reserve monetary policy meeting, a sign of concern that cycles of interest rate cuts from the United States to Australia may soon be coming to an end.

Yields on a Bloomberg index of long-term government bonds are back at maximum 16 yearswith bets on the money markets underlining this sentiment. Traders now expect virtually no further interest rate cuts from the European Central Bank, while they are betting on an almost certain rate hike this month in Japan and two quarter-point hikes next year in Australia.

With the launch of Bonar 2029N and a declining financial market, the government faces an important tender

Even in the US, where the Fed is expected to cut interest rates this Wednesday, the picture is changing quickly. Yields on 30-year government bonds are back down Maxima of different months as investors observe a less favorable outlook for monetary policy, inflation and fiscal discipline.

A price indicator tracked by the Fed rose 2.8% in Septemberalmost a percentage point above the central bank’s target. Concerns about the independence of the next Fed chair are prompting some investors to build a risk premium into the Treasury curve, and borrowing to cover a $1.8 trillion budget deficit is also weighing on bonds.

“A ‘disappointment trade’ is emerging in several developed markets” as investors digest potential rate-cutting cycles from central banks ends soonwrote Robert Tipp, chief investment strategist and head of global fixed income at PGIM Fixed Income. U.S. long-term interest rates also face challenging conditions as a possible end to the Fed’s easing cycle is in sight, he added.

Today the US Federal Reserve will determine whether to cut the interest rate and what impact this would have on Argentina

The change in the market reflects a growing conviction that the cycle of interest rate cuts introduced last year to boost growth while driving global stocks to record highs and driving up bond prices is soon coming to an end. Bond investors are now assessing the outlook for global growth and examining inflation risks amid President Donald Trump’s trade war and rising government debt from Tokyo to London.

What Bloomberg strategists say…

“Investors need one now higher premium There is increased risk given growing deficits, greater macroeconomic uncertainty and a break in the reliable negative correlation between stocks and bonds. Bonds simply don’t offer the same diversification benefit they once did.”

FED interest rate cut: what to expect in the future and what impact may it have on Argentina?

—Skylar Montgomery Koning, macro strategist.

Bond yields have also risen in Japan and Germany Multi-year highswith longer-dated bonds coming under greater pressure due to expectations of larger issuance. Japan and the United Kingdom are responding to the shift in investor demand by increasing short-term lending.

Limited

Treasuries are in the spotlight just hours before the Fed meeting, where officials are expected to comment Third cut in a row. 10-year Treasury yields are at their highest level since September, a rare phenomenon that suggests concerns about U.S. debt levels and who might replace Chairman Jerome Powell when his term ends in May.

Trump said he had already decided who he would appoint to head the Fed

The director of the White House National Economic Council, Kevin Hassett, emerged as such Main candidate and is widely seen as a supporter of Trump’s preference for lower interest rates.

“We have seen Hassett Trade pricing in looser monetary policy in recent days, with a weaker dollar, a steeper yield curve and a rally in risk assets,” wrote Gordon Shannon, portfolio manager at TwentyFour Asset Management. “However, markets are hesitant about how far they can go – even a Hassett-led Fed could be constrained by persistent inflation.”

This is what the global bond markets are currently signaling Pressure on The credit costs remain.

GZ