ANZ Research has noted what it terms as “increased market chatter” in regards to speculation of the end of record-low bond yields and the beginning of a rising trend. Yields around the world have been falling since 2008 as central banks maintained what amounted to unprecedented price support activities and as economies in Europe, the US and Japan grew at rates less than trend with next-to-no inflation.
The bank’s research staff are now asking the question if this scenario has changed. ANZ refers to rising global inflation, better GDP figures in the UK, US and even in Europe. Talk of tapering of bond purchase programmes by the European Central Bank and a change to the Bank of Japan’s 10 year bond yield policy have added to the picture of a less-friendly bond market environment. Then there is also the US Fed’s expected December meeting rate increase, which is likely to place upwards pressure on US yields.
However, ANZ is reluctant to quit the “lower for longer” view of bond yields. It says “Productivity growth is still poor, leverage extreme, central banks still dovish, and demographic pressures still evident. So while yields could indeed continue to lift modestly (we expect them to), larger moves would require a much firmer economic backdrop and there is still limited evidence of that.”