January 10, 2022
Treasuries had their worst-ever start and German debt followed to send yields to the highest since 2019.
Now they are threatening to break above 0% as traders bet European Central Bank policy makers will have to actto rein in inflation that has acceleratedto record levels.
The overall theme is one many foresaw coming in 2022: of markets repricing as inflationary pressures force the hand of central bankers.
As bond issuance gets going this month and the policy speeches roll in, thats likely to lead to more volatility and divergence between rates.
The Federal Reserve is leading the way, with market expectations for at least three rate hikes and a reduction in the bond assets on its balance sheet.
While the ECBs debt buying continues, its total quantitative easing this year is expected to fall to just over 500 billion euros ($570 billion), almost half the level seen in 2021.
OneProSpecial Analyst
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