US rate rises may need to go higher

Despite recent signs of a moderation in US growth, we believe that it is premature to conclude that interest rates are beginning to bite. Growth in the US and continental Europe is forecast to continue to run ahead of trend and in this environment, additional monetary tightening continues to be expected in both markets. On the face of it, this is bad news for global bonds. However, we are also mindful that inflationary pressures continue to remain subdued and with real yields high on a historic comparison, this should lend fundamental support to bond markets and provide something of an an...