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Spike in bond yields should not last (Jan 09)

Over the past month, global bond yields have risen somewhat in response to growing concerns about the outlook for public finances and sovereign credit risk. Nonetheless, we continue to think that the bond “bubble” has not burst. Monetary policy is likely to remain exceptionally loose for a lot longer than markets think, deflationary pressure is set to intensify, and the adoption of quantitative easing should be positive for bonds in the short to medium term.

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