Investing.com — There has been widespread debate about the sustainability of recent increases in global bond yields, as well as their potential impact on financial markets and economies.
Although short-term dynamics may support elevated yields, cyclical forces and structural factors indicate that yields will eventually stabilize, as per analysts at BCA Research.
The rise in bond yields, particularly since the first rate cuts by the U.S. Federal Reserve in late 2024, reflects a combination of factors.
Adjustments in monetary policy expectations have been a major driver, with the market reassessing the trajectory of future rate hikes.
This realignment has reverberated globally, influencing yields across developed and emerging markets.
However, the long end of the yield curve has increasingly decoupled from immediate policy expectations, underscoring the growing importance of term premia driven by inflation uncertainty and government funding concerns.
BCA Research notes that much of the recent yield increase can be attributed to risk premia adjustments.
Countries with current account deficits, such as the United States and the United Kingdom (TADAWUL:), have…
Read the full article here