Global government bonds rallied ahead of U.S. inflation data Thursday as traders bet that signs that the rapidly recovering U.S. economy is overheating will be survived by a new reassurance on to the support of monetary policy by the Federal Reserve.
The yield on the 10-year Treasury bond, which moves inversely to its price, fell 0.05 percentage points to 1.486 percent when investors bought the debt. This was its lowest in three months, according to Refinitiv data, while yields on European government bonds have also fallen significantly.
Economists expect U.S. consumer prices, excluding volatile food and energy costs, to rise 3.5 percent in May in its biggest annual jump since 1993. shown that Chinese factory door prices have risen at the fastest pace since the financial crisis last month.
Rising inflation raises fears of higher interest rates that make fixed interest rates as government bonds less attractive. But the U.S. central bank, which meets next week, has argued that higher price attacks are a transient effect of the industry reopening after coronavirus arrests.
“Bonds come in anticipation of meetings where the Fed will say something like that,” said Randeep Somel, portfolio director at M&G.
Some senior Fed officials, such as Vice President Randal Quarles, have called discussions on the $ 120 billion reduction in banks ’monthly purchases of bonds that have supported markets through the pandemic. Another, Richard Clarida, has sustinia that the main lending rate in the United States should remain at the record low until the nation reaches maximum employment.
On Thursday, at the European Central Bank’s monthly meeting, its chairman, Christine Lagarde, said the bloc still requires a supportive monetary policy and that a higher inflation rate of the eurozone will not last.
“While we expect President Lagarde to be cautiously optimistic… We also expect her to stress that the recent rise in price pressures is likely to be transitory,” said Daiwa economist Chris Scicluna.
Italy’s 10-year bond yield fell 0.06 percentage points to 0.81 percent Wednesday. The equivalent Bund yield in Germany fell 0.04 percentage points to minus 0.259 percent.
The moves come after government headlines were hit hard in early 2021 by hopes US President Joe Biden’s multimillion-dollar stimulus package would cause a long-term inflationary trend. The 10-year Treasury yield rose from about 0.9 percent in early January to 1.77 percent at the end of March.
“Shorts are now retiring from bond markets,” said Esty Dwek, head of Natixis ’global market strategy, referring to businesses looking to profit from falling stock prices. “They price a lot in rising inflation very quickly,” he added, “but we don’t know if the Fed is right or wrong until closer to the end of the year.”
Stock markets were more subdued on Wednesday. The U.S. S&P 500 index, which traded in a tight range for weeks after hitting an all-time high last month, was flat in New York’s top stocks. The Stoxx Europe 600, which went up to a record earlier this week, was also trading flat.
The technology-focused Nasdaq Composite increased 0.3 percent.
In currencies, the euro rose 0.3 percent against the dollar, to $ 1.2204. The pound was down 0.1 percent at $ 1.4136.
Brent crude, the international benchmark for oil, added 0.8 percent to $ 72.75 a barrel.