Low inflation favours fixed interest

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Strong economic growth, tight labour markets, rocketing oil prices and heady asset price inflation h...

Strong economic growth, tight labour markets, rocketing oil prices and heady asset price inflation have combined to form a corrosive cocktail for global bonds in 1999. Sentiment has swung dramatically from the overwhelming bullishness prevailing in 1998. In early October 1998, the benchmark US 30 year bond yielded just 4.7%; a year later, that yield has risen two percentage points and the price of the bond has fallen almost 25%. That compares closely with the damage inflicted by the 1994 bear market, when the price of the long bond fell 26% from the 1993 peak. These losses suggest how...

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