What's Really Going on in Bond Markets?: 3-Minutes MLIV
Speakers
Paul Dobson
— Executive Editor, Bloomberg
Guy Johnson
— Anchor, Bloomberg
Summary
The panel discusses rising bond yields and their impact on global markets. Paul Dobson notes long-term bonds are under pressure due to inflation and oil, while short-term bonds hold up. He also highlights dollar strength pressuring commodity currencies. Guy Johnson suggests higher yields are a headwind for equities.
- Global bond yields rise, especially long-term.
- Inflation concerns driven by oil and PPI/CPI data.
- Corporate bonds and short-term bonds relatively resilient.
- Dollar strengthens on haven and yield appeal.
- Commodity currencies such as AUD and ZAR decline.
- Equities face headwinds from higher borrowing costs.
- Market pricing in potential Fed rate hikes.
Trade Ideas
Avoid long-term government bonds now
Long-term bonds are vulnerable to inflation and rising yields due to oil price increases, high Japanese PPI, and US CPI data. This is causing losses at the back end of the yield curve and pushing up long-term borrowing costs. Avoid long-duration government bonds.
Dollar long, commodity currencies short
The dollar is strengthening as a haven asset, supported by higher oil prices benefiting the US as a net producer, rising treasury yields, and growing expectations that the Fed will hike rather than cut rates. This is putting pressure on commodity currencies such as the Australian dollar and South African rand, which are declining as risk is taken off the table.
Dollar long, commodity currencies short
The dollar is strengthening as a haven asset, supported by higher oil prices benefiting the US as a net producer, rising treasury yields, and growing expectations that the Fed will hike rather than cut rates. This is putting pressure on commodity currencies such as the Australian dollar and South African rand, which are declining as risk is taken off the table.
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