Bond markets caught between monetary and fiscal policies
CIO Viewpoint Fixed Income | Authors: Dr. Konrad Aigner - Senior Investment Officer Europe, Ahmed Khalid - Investment Strategist Europe, Andreas Umsonst - Investment Officer Europe, Meenakshi Singh - Investment Officer
Introduction
Bond market participants are still occupied with the repercussions of the pandemic. The strong inflation increases after production losses and disruptions of supply chains have been successfully tackled by central banks. Inflation rates are down close to central banks’ target levels and ECB, Fed and BoE were able to start rate cut cycles. With elections in Europe and the U.S., however, budget and public debt issues as well as inflation fears have moved to the fore again. Costly fiscal policy measures during the pandemic had driven up deficit and debt levels. Where public finances seem at risk of worsening, bond yields tend to rise, and bond market participants now appear to be acting “bond vigilantes” once again.
Key takeaways
Further links on the topic
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