This repricing of fixed income markets has caused the global stock of negative-yielding government and corporate debt to vanish -- it stood at over USD18tn in late 2020. Bonds are becoming more attractive despite persistent concerns about high inflation and the scope for further interest rate rises.
The US dollar index has fallen by more than 10% since end-September; it should stabilise ahead unless the Fed is more dovish than expected.
Emerging market (EM) sovereigns have raised more than USD40bn on debt markets this month, but many fragile EMs struggle near debt distress.
Developed-nation equity markets will struggle to rebound from a bruising 2022 despite investor hopes that inflation and rates have peaked.
Bonds’ higher coupon payments are providing enough of a buffer against the risk of further falls in bond prices as central banks hike rates.
US Treasuries enjoy strong demand as a safe asset; this will become more apparent as the political battle over the debt ceiling deepens.
