International Bonds October 2015

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The UK is, like the US, trying to balance relatively fragile growth in their economy with an interest rate setting that will allow them to manage future inflation. UK 10 year bond rates had increased over October on the basis that the economy was growing enough for the Bank of England to lift rates but with the ECB flagging further stimulus and the UK’s GDP for the September quarter coming in at 0.5%, below expectations of 0.6%, the BoE held rates steady again.

Most other European countries’ 10 year bond yields fell over the month largely as a result of ECB president Mario Draghi’s comments regarding further stimulus and we even saw Italian short dated bonds sold for the first time at negative yields. Sweden added to its QE programme for the fourth time since February. Away from Europe, New Zealand paused their rate cutting cycle to assess the impact of its previous three cuts.

In the US the Fed’s board meeting was closely watched for signs that it would lift rates. In the end it prevaricated once more although chair Janet Yellen did specifically mention the December meeting as a potential start date to begin to raise rates in the US for the first time in around 8 years.

100115 Global 10Y bonds yields