A week ago, investors’ attention was fixed on the renewed slump in government bond prices and the knock-on impacts thereof.
That already feels like a distant memory in the context of both this week’s improving fortunes and, much more significantly, the emergence of a horrifying war in the Middle East. But from a blinkered economic perspective, it would be remiss not to give the recent yield spike its due consideration.
There are any number of angles from which to address the issue: the IC companies and markets podcast team tried a few in last week’s episode. The Federal Reserve’s ‘higher for longer’ message has hit home, but this is not the only story. Yields may also be rising because of better growth prospects, or because recession is on the way. And are technical factors, such as an increase in supply and a shift in term premia, having their own impact? The answer to these questions, unknowable as they may be at this stage, could have a sizeable bearing on portfolios in the months ahead, which is why they have attracted so much attention.