Monday, June 12, 2017
Downward pressure on bond yields.
Government bond yields rose in late 2016 as a result of higher inflation and expectations of US fiscal stimulus. However, although GDP growth is picking up in the euro-area, the United States and Japan, inflation pressures remain subdued and US fiscal plans have been delayed. Combined with falling political risk in the euro-area, this has pushed yields down and the global stock of negative-yielding sovereign debt is rising again. Moreover, ultra-accommodative monetary policies continue to supress yields, distorting asset prices and contributing to the mispricing of credit risk.