Rising inflation won’t end bond bull-run

Rising inflation won’t end bond bull-run

The recent improvement in US inflation is unlikely to end the bond bull-run seen in markets for the last 30 years, according to BNY Mellon Investment Management.


US Treasury yields climbed from 1.32 per cent in July 2016 to 2.5 per cent in early January 2017, the company said, owing to the increased potential for faster economic growth in the wake of the recent US elections as well as the subsequent interest rate hikes from the US Federal Reserve.

The company said rising yields had lead some commentators to question whether “the Trump era could signal the end of a 30-year-plus bull market in bonds”, however BNY Mellon team leader for global fixed income Paul Brain said this was unlikely to happen in the near-term.

“We have seen about 30 years of declining yields and many are asking if they going to go up substantially. We think yields will rise slightly this year but do not feel the trend of the past 30 years is suddenly going to go into a major reverse,” he said.

Mr Brain said rising interest rate expectations were inevitable given the withdrawal from “a very loose monetary policy and fiscal expansion”, with the evidence of this already visible in the US.

“Yields have been rising in the US because the economy is doing well and may rise even further later this year depending on the impact of the new US government’s policies,” he said.

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Rising inflation won’t end bond bull-run
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