Long-term bond yields have been hitting multi-decade highs with implications for everything from government finances to stock-market valuations.
Bond yields are rising around the world. Why, and what does it mean for investors?
- Why are yields rising? A mix of cyclical and structural factors is pushing borrowing costs higher. Inflation concerns, geopolitics and changing expectations for central banks are combining with longer-term forces such as high government deficits and growing debt issuance.
- Supply and demand. Governments are issuing large amounts of debt, while some traditional buyers of long-dated bonds are becoming less active. That shift in supply and demand has contributed to higher yields.
- Why is the UK under scrutiny? The UK has been especially sensitive to bond-market moves because of concerns about growth, public finances and the changing structure of its bond market.
- Can policymakers do anything about it? Options range from debt management and market intervention to the much tougher challenge of fiscal consolidation.
- What does it mean for equities? Higher bond yields do not automatically spell trouble for stock markets. Much depends on why yields are rising and how quickly those moves occur.
Listen to the latest episode of Macro Bytes for the full discussion.
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