Since US yields started rising after the Fed meeting in Sept, global bond yields are higher, while the dollar and gold are surging, reflecting an increasingly global debt contagion.
While many in the US are laser focused on the US yield rise in recent weeks, what is notable is how it looks to be flowing through to global bond markets in a way that is pretty disconnected from their own underlying domestic conditions.
US yields up nearly 70bps since mid-Sept pic.twitter.com/OYv4XcxEMS
— Bob Elliott (@BobEUnlimited) October 29, 2024
German yields are up despite very weak economic reports. pic.twitter.com/ufx7Et3QAn
— Bob Elliott (@BobEUnlimited) October 29, 2024
Aussie yields sharply higher. pic.twitter.com/CR0FBK5qir
— Bob Elliott (@BobEUnlimited) October 29, 2024
Even Japan which has scrapped intentions of a more aggressive hiking cycle has seen yields move higher. pic.twitter.com/z4KTs2kfw5
— Bob Elliott (@BobEUnlimited) October 29, 2024
But so too the euro is down vs. the dollar. pic.twitter.com/vv6iOxIwXH
— Bob Elliott (@BobEUnlimited) October 29, 2024
Same pattern with AUD, now pushing back toward cycle lows. pic.twitter.com/mYsblR0m29
— Bob Elliott (@BobEUnlimited) October 29, 2024
Taken together this is a pretty acute move both out of these countries bonds, but also out of their currencies, suggesting a pretty full scale withdrawal of capital from global sovereign debt markets and currencies, particularly if thought about in gold terms. pic.twitter.com/teH0GoBogL
— Bob Elliott (@BobEUnlimited) October 29, 2024
For many developed economies facing slower economic conditions and fading inflation pressures, these moves are all the more notable because they run counter to the trends in underlying domestic conditions and intended monetary policy.
— Bob Elliott (@BobEUnlimited) October 29, 2024
Sovereign debt yields serve as the backbone of global financial asset pricing along with real economy borrowing transactions.
A further flight out of sovereign debt risks creating a broader drag on other financial assets and these economies.
— Bob Elliott (@BobEUnlimited) October 29, 2024
The combination of a commitment to 'over easy' money from central banks and continued expansionary fiscal policies across governments are driving this trend to continue.
It creates an increasing risk of a challenging repricing of higher risk-premiums and discount rates ahead.
— Bob Elliott (@BobEUnlimited) October 29, 2024