Government bond markets, which have enjoyed a summer of solid price gains, now face a reckoning with their bets for speedy central bank rate cuts and slowing inflation, not to mention a tight U.S. presidential election.
Benchmark 10-year U.S. Treasury yields are set to end August down nearly 30 bps, their biggest monthly drop this year, driven by expectations for speedier rate cuts – even as economic data has eased the recessionary fears sparked by the last U.S. jobs report.
With borrowing costs in Germany and Britain posting big drops in July, all three regions were already set for their first quarterly drops since the end of 2023. Bond yields move inversely with prices.
For some, these moves confirm one of the current big investment themes — the notion that “bonds are back” after taking a beating amid the post-pandemic surge in inflation and interest rates.
Government bonds returned just 4% globally last year after 15% losses…
