Bond Strategists Warn Yields to Stay High Even If Iran War Ends
View original at finance.yahoo.comBond Strategists Warn Yields to Stay High Even If Iran War Ends (Bloomberg) -- For all the hand-wringing over war-related inflation fears, there are signs that other drivers are having as much a bearing on longer-term borrowing costs…
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Recent jump in long-term yields will not fully reverse even if inflation spurred by costlier oil retreats when the Iran war ends
60% confidenceThe recent jump in some long-term yields will not fully reverse even if inflation spurred by costlier oil retreats
60% confidenceThe recent jump in some long-term yields will not fully reverse even if inflation spurred by costlier oil retreats
60% confidenceTrump will announce a negotiated deal with Iran shortly
60% confidenceIn an environment where the Fed could potentially be on the table and become a driver of even larger fiscal deficits amid rising debt servicing costs, the long end of the curve becomes more sensitive to what should be primarily a move in short-end rates
60% confidenceThe interaction between rising debt levels, potentially higher neutral rates, and AI could be driving real rates higher rather than inflation fears from the Iran war
60% confidenceUS 10-year breakeven inflation rates are 50 basis points below where they were in the first half of 2022 even with the war underway
60% confidenceIn an environment where the Fed could potentially be on the table and become a driver of even larger fiscal deficits amid rising debt servicing costs, the long end of the curve becomes more sensitive to what should be primarily a move in short-end rates
60% confidenceThe argument that duration is selling off globally due to inflation fears is hard to square with market pricing of medium- and long-term inflation risk
60% confidenceThe recent jump in some long-term yields will not fully reverse even if inflation spurred by costlier oil retreats
60% confidence