Bond Investors turn positive in US

This week we have seen markets trying to get ahead of the US Federal Reserve once again. For most of this year government bonds have sold off as investors anticipated aggressive rate hikes from the US Fed and other central banks. With economic data deteriorating, bond markets are now trying to time the moment when the Fed pauses, or even reverses, it’s rate hikes. The minutes from the latest Fed interest rate meeting show it moving towards a less aggressive path for rate rises, while indicators show economic activity slowing and unemployment beginning to rise.

However, the outlook for interest rates, and the knock-on effect on bonds values, remains balanced and investors calling the top of the interest rate hiking cycle have the potential to be disappointed. Sticky inflation or stronger than expected economic data could persuade the Fed that it needs to remain aggressive for longer. The ECB and Bank of England have been talking up the need to continue tightening and central banks in Sweden, New Zealand and South Africa all increased rates by 0.75% this week as they remain committed to getting inflation under control. 

For the following stories, please click on this link*

• UK – Gloomy outlook worse than other developed countries
• Oil – Fears of a global slowdown weigh on prices
• Bonds – Government debt rises as markets look to Fed slow down

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