12th April 2019
The continuation of the drop in global bond yields has been a feature of 2019. Much of this has been driven by the marked turnaround in the monetary policy stance of the US Federal Reserve. Whilst changes in certain economic and financial indicators (PMI, Retail sales, US yield curve) support this shift in outlook, other (inflation expectations, employment, wages) metrics have remained resilient. Perhaps most notable of all is the continued strong performance of risk assets in the face of increasing global uncertainty. Below we take a closer look at what we believe is driving the Fed’s current thinking and what, if anything, we can glean from the current dichotomy between risk assets and the bond market.