“Bond Markets Appear Exhausted”

Even though many are hankering for an inflection point in the bond markets, HSBC analysts believe it’s too early to call a turning point, and there is plenty of evidence of policy exhaustion. Steven Major and colleagues said in their August 4 research piece titled “Fixed Income Asset Allocation: Hold your horses” that they remain bullish on EM rates, where improving domestic fundamentals continue to attract flows from DMs.

Japan’s real rates are extremely low

The HSBC analysts point out that the focus has shifted to Japan, where, despite all the policy efforts, forward real yields are exceptionally low for a reason. Though there has been some focus on policy fatigue in Japan, the analysts are not pushing their yield forecasts...