BNY’s Newton: commentaar op de obligatiemarkt

August 8, 2019

‘The extraordinary moves we have seen in bond markets have driven many to speculate that there are a number of hidden messages about impending credit crisis in China, potential economic recession in the US and a Japanification of Europe. Whilst we would not dismiss any of these outright the reality is that we have been witnessing a slowdown in global trade since the middle of last year and for the moment monetary policy, (which is reaching extreme levels) is the only tool available.

‘Lower cash rates from central banks in the absence of inflation will lead to lower bond yields. The market will anticipate central bank moves, which allows yield curves to temporarily trade through current cash rates. Hidden behind these strange shapes in yield curves is the belief that further cuts in rates are not going to help turn economic growth around and not unlikely to cause inflation. Central banks generally move at a slower pace than market expectations and there is usually a period when the reality of the central bank meeting schedule pushes yields back up.

‘Longer term, once monetary policy is exhausted, Governments will focus on boosting fiscal spending. Unlike the monetary policy tool, fiscal policy takes longer to put in place and comes in various shapes and sizes. Until there is coherent plan there will continue to be a focus on manufacturing over-capacity, which is fuelling the trade disputes and having a long-term deflation effect.’