Jenna Barnard and John Pattullo, Co-Heads of Strategic Fixed Income, join Adam Hetts, Global Head of Portfolio Construction and Strategy, in the latest episode of our Global Perspectives podcast series, discussing all matters bond yields, central bank policies and the economy.

Key Takeaways

  • The real driver of movements in government bond yields is not the actual "level" of economic data, as many – including central banks – tend to follow, but the rate of change in the data. Thus, we often see policy errors by central banks that hike at the peak of an economic cycle, while the data is decelerating rapidly.
  • We see a likely inflection point to the downside for growth and inflation this year. Economic data is decelerating fast as we come up against base effects this spring, and there are headwinds to growth such as fiscal and monetary tightening and the peak in the inventory cycle.
  • Thus, we are at odds with the consensus narrative that bond yields will continue to rise because central banks are tightening. This type of linear narrative opens up a great opportunity in government bond markets for our cyclical duration management, while credit markets remain reasonably disciplined.

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