Global bonds have erased earlier losses for the year amid growing concerns over the deteriorating U.S. economic outlook, driving increased demand for fixed-income investments. Bloomberg’s index, which tracks global sovereign and corporate debt, has rebounded by 1% in 2024 after experiencing a drop of up to 4.6% in mid-April. Notably, the index surged by 2.3% just last week. The bond market saw an additional boost on Friday, following a U.S. payroll report that revealed a slowdown in hiring and a rise in the unemployment rate to a three-year high.
In response, 10-year Treasury yields fell by five basis points in Asia on Monday, building on a 19-basis-point drop observed on Friday after the disappointing U.S. nonfarm payrolls data. Japanese 10-year benchmark yields decreased by up to 17 basis points, while New Zealand’s yields of similar maturity fell by 10 basis points.
Prashant Newnaha, a senior rates strategist at TD Securities in Singapore, noted the significant impact of Japanese stock market turmoil on global bond markets. “Japanese stocks are experiencing severe losses this morning, creating a renewed demand for global fixed income,” he said. “While market fluctuations are expected, the decline in U.S. yields is likely to continue.”
Following the recent weak economic data, traders are increasing their expectations for Federal Reserve rate cuts. Economists at Citigroup Inc. and JPMorgan Chase & Co. now anticipate that the central bank will reduce its benchmark rate by half a point at both its September and November meetings.
