MUFG Research discusses the reasons behind the recent sharp drop in global yields.
"Global bond markets are experiencing a sharp reversal as yields have topped out and are now heading lower. The peak for the 10-year US Treasury bond yield was recorded the day before the last FOMC meeting on 14th June, and it has since fallen by around 70bps even after the Fed raised rates by 75bps on 15th June. The recent sharp drop in global yields has been driven by a combination of factors including: i) safe haven flows as global growth fears intensify, ii) market participants paring back expectations of how far central banks will be able/need to raise rates in light of the deteriorating growth outlook, and iii) an easing of market-based measures of inflation expectations," MUFG notes.
"In the current circumstances, the traditional safe haven currencies of the US dollar, Swiss franc and yen appear set to continue to outperform in the near-term," MUFG adds.