Growth bond market this year surprised investors and adjust their expectations. Total return of 7-10-year bonds the figure for shares in all developed economies except the United States. In January, we predicted that the U.S. Treasury yields rise 25 b.p.za this year and will be 3.25%, which was much lower forward rates at the time, and spoke in favor of the neutral position, and certainly not to support “bovine “standpoint. What have we missed?
The Bank of Japan and the ECB lowered the bond premium. Weak U.S. economic indicators and focus on macro-prudential measures led to “structural” disagreement regarding reduction of neutral rates (and, consequently, the bond yield). Our explanation decline in bond yields this year – more cyclical and related to monetary policy in the euro area and Japan. These factors contributed to U.S. Treasuries, despite market expectations that the Fed will tighten monetary policy.
Dynamics, which stimulated the growth of bonds weaken in the coming year. Stabilization of the U.S. economic growth bonds will cause the Fed to “absorb” the excess liquidity in the first quarter of 2015, on the eve of the first rate hike scheduled for this time. The new program of long-term target of the ECB refinancing (TLTRO), especially in tandem with the growth bonds of the securitization market and loan financing will lead to growth of loans and a gradual increase in the rate of inflation.
Finally, inflation in Japan seems unlikely, and therefore little risk adjustments in nominal rates in the near future. “
Tags: Goldman Sachsgrowth bonds