Is the Global Bond Market Headed Towards a Sell-off Soon?
A recent Reuters poll indicates an increasing likelihood of a major correction in the global bond market coming up in the next three months
A recent Reuters poll indicates an increasing likelihood of a major correction in the global bond market coming up in the next three months, driven by central banks looking to taper stimulus efforts as economic recovery around the world picks up pace. In the most recent FOMC meeting, the Fed took markets by surprise when a majority of policymakers indicated interest in beginning discussions around tapering asset purchases and raising interest rates by 2023.
Markets reacted to the unexpectedly hawkish tones by driving a sell-off in equity markets while Treasury yields spiked higher. However, further volatility in bond yields continued into this week when Fed Chairman Jerome Powell reiterated his dovish stance and played down effects of price rise, driving the bond yields lower.
More than 60% of fixed-income strategists who participated in the poll expect global bond markets to witness sharp sell-offs over the course of the coming three months. In addition, respondents expect bond yields to edge higher in about one year from now.
The benchmark 10-year US Treasury yields could surge to 2% by next June, up from around the current levels of around 1.50%. In addition, the median forecast for the benchmark yields is to rise to 1.75% over the next three months.
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