Bond Yields Can Only Go Up, Analysts Believe

Global sovereign bond yields can only go up as indicated by the recent surge in Treasury yields, according to a recent poll on analysts by Reuters.

Most of the analysts polled believe that yields are only going higher, along with the widening of the gap between short and long-term maturities. The majority say this indicates a shift from the pandemic emergency policy by top central banks.

Growth is likely to remain above trend, with inflation elevated at the moment expected to retain its uptrend on the forecast horizon. It will be “natural” for interest rates to move higher.

A slight majority or 26 of the 50 analysts expect a widening between the US two-year and 10-year Treasury spreads over the coming year, 11 expect the spreads to remain steady, and 13 expect the gap to narrow.

The tapering of the Fed’s bond-buying program is likely to have a minimal market impact at this stage, with the purchases likely to be reduced by $10 billion in Treasury and $5 billion from mortgage-backed securities.