Major advanced economy central banks are likely to take back less than half of the interest-rate hikes they rammed through over the past two years — an outlook reshaped significantly by US outperformance.
Longer miles Monetary policy pivots are always hard to time, but the havoc the pandemic caused and the unprecedented, massive dose of fiscal stimulus since spring 2020 has made things all the harder, said Anne Walsh, chief investment officer at Guggenheim Partners Investment Management. Walsh said she’s very positive on investment-grade bonds, seeing underlying credit fundamentals as good and yields at about 5.5% to 6.5% as attractive. The Bloomberg US Aggregate index yielded 5.7% as of Wednesday.
Money markets in Europe show greater confidence in easing this year, with about 73 basis points for the European Central Bank and 47 basis points for the Bank of England as of Thursday. ADVERTISEMENT CONTINUE READING BELOW “There’s less downside risk in US rates than we see in Europe,” said Steven Barrow, the London-based head of G-10 strategy at Standard Bank. He’s telling clients to favor German bunds over US Treasuries.
That means private-sector investors will need to step up to absorb the supply of government debt. Higher-for-longer yields may make that an easier proposition.