Signs of life in long-moribund inflation trades also suggested yields should head higher. This month’s Bank of America Corp. survey of investors found the proportion of those seeing an upswing in consumer-price growth around the world over the next year rose to 56%, an increase of 14 percentage points from last month and the highest level since November 2018.
“Without the virus and without the geopolitical tensions sure, rates would be higher,” said Lyngen at BMO. “Alas, that is not the reality of global financial markets at the moment.”
Instead, bonds with below-zero yields continue to make investors money because prices keep rising amid huge inflows into fixed-income funds, enduring demand from pension funds to central banks and now the safe-haven trade.
“With many clearly concerned about elevated risk asset valuations and the China coronavirus also providing a new dimension, the risk of being ‘caught short’ bonds at the end of the fiscal year might soon start to factor more heavily into investment decisions,” Morgan Stanley strategists wrote in a Jan. 24 report.
This article was provided by Bloomberg News.