A look at the day ahead in Asian markets.
China’s latest inflation figures are out on Thursday, and they could not be coming at a more fascinating – some might say alarming – time for global bond markets.
Long-term yields around the world are shooting higher as investors bet that sticky inflation will force the U.S. Federal Reserve and other central banks to dial down or even halt their rate-cutting cycles.
The 30-year UK gilt yield is the highest since 1998, the 30-year U.S. Treasury yield is a whisker from 5%, and the U.S. ‘term premium’ – the risk premium investors demand for lending long to Uncle Sam rather than rolling over shorter-term debt – is the highest in a decade.
If this is a reflection of investors’ fears that the inflation genie has not been put back in the bottle and central banks are losing control over the long end of the bond curve, policymakers should be worried.
Fed Governor Christopher Waller seems relatively relaxed though, saying on Wednesday he still thinks inflation will fall toward the Fed’s 2% target, allowing for further rate cuts. But minutes of the Fed’s policy meeting last month showed policymakers are wary, particularly around the impact of policies expected from the incoming Trump administration.