By Stefano Rebaudo
(Reuters) -Bond markets remain focused on budget concerns in the U.S., euro zone and Japan, meaning the recent pullback in ultra-long sovereign yields may prove short-lived, potentially reigniting interest in this year’s popular curve steepening trade.
Investors have been quick to react to governments that up their spending, or are not seen to be doing enough to rein in their finances, by selling their long-term bonds, pushing borrowing costs for some countries to multi-decade highs. However, they have shown more leniency towards shorter-dated bonds.
On Monday, ultra-long Japanese bond yields hit record highs and French bond yields neared recent 16-year peaks, while shorter-dated yields rose more modestly, as political turbulence shook markets.
PRESSURE ON BUDGETS UNLIKELY TO EASE IN SHORT TERM
This dynamic, known as curve steepening, has been the runaway trade in the bond market this year. The gap between 10- and…
