First clear signs of slowdown emerge The m/m falls in Turkish retail sales and industrial production in August provided the first clear signs that economic activity has started to soften following the policy U-turn earlier this year. Policy tightening …
11th October 2023
We expect a continued paring back of US interest rate expectations to keep pushing long-dated Treasury yields down in coming quarters. But higher term premia may limit those falls in yields. Moves in long-dated Treasury yields have been mixed so far …
10th October 2023
Labour has made housing a major theme of its conference, and the party’s attitude towards New Towns and social housing means that the next election could prove a turning point in the structure of the UK housing market. Over the past 30 years successive …
Surging Treasury yields have pushed mortgage rates above 7.5%, higher than we had anticipated. If these borrowing rates persist, lending and sales volumes could fall even further in the near term creating a risk that house prices fall rather than stagnate …
The UK manufacturing sector has faltered in recent months, as rising interest rates and slowing economies in many parts of the world have cut global demand. That spells trouble for manufacturing demand and suggests yields in that subsector will see a …
Flows out of EM bonds and equity markets have intensified in recent weeks amid the sell-off in global bond markets, and an escalation of the conflict between Israel and Gaza would exacerbate this further. Nonetheless, the narrowing of current account …
Despite a marked improvement in Egypt’s current account deficit, the pound’s de-facto peg is deterring critical capital inflows and adding to concerns over large external financing needs. A fresh devaluation and a commitment to a flexible exchange rate …
This report has been updated with additional analysis, as well as a chart and table of the key data. Inflation at or close to its peak Egypt’s headline inflation rate picked up from 37.4% y/y in August to a fresh multi-decade high of 38.0% y/y in …
Fall in inflation increases chances of November rate cut The larger-than-expected fall in Czech inflation in September, to 6.9% y/y, increases the chance of policymakers kickstarting a monetary easing cycle at their next meeting in November. We remain …
Lower inflation suggests that Norges Bank is done As a result of September’s weaker-than-expected inflation data from Norway, we now think that Norges Bank’s tightening cycle is over . The decline in CPI inflation from 4.8% in August to 3.3% in September …
Any fall in bond prices resulting from higher bond yields won’t affect the BoJ’s balance sheet unless the Bank decides to sell its holdings. By contrast, rising interest payments on commercial banks’ reserve holdings could create losses, though those …
Central banks in both Australia and New Zealand are likely to retain their hawkish bias in the near term, given that inflation is far from tamed in either country. While we think the RBNZ's tightening cycle is over, we expect RBA to hand down one final …
The recent shift towards looser fiscal policy in Italy and increase in sovereign bond yields once again have raised concerns that investors may lose confidence in Italy’s ability to sustain its debt burden. We don’t think this will morph into an acute …
9th October 2023
The latest war between Hamas and Israel comes at a tricky juncture for global markets, and could easily increase volatility further. At this point, we think there are three key considerations around the potential market fallout. First, major financial …
Welcome to a world of higher interest rates. This in-depth analysis shows you how the structural forces that have weighed on equilibrium real interest rates over the past two decades have faded, and the powerful new drivers that are likely to push them …
The scale of the rise in bond yields over recent weeks has provoked worries about the impact on real estate. The sell-off presents an upside risk to our yield outlook, but we think falling inflation will help bond yields across the region to soon fall …
Note: We discussed the outlook for oil prices and the geo-economics around the conflict between Israel and Hamas in a Drop-In on 9th October. Click here to watch the recording. First and foremost, the renewed fighting between Hamas and Israel since the …
Fresh rise in services inflation to harden Banxico’s hawkish stance Mexico’s headline inflation rate continued to edge lower, to 4.5% y/y, in September on the back of softer core price pressures. Even so, the fresh rise in services inflation will …
The Asian Tiger economies of Korea, Singapore, Hong Kong and Taiwan are likely to be among the biggest beneficiaries of the emergence of new AI technologies. But the boost will not be enough to offset the drag from worsening demographics, and we still …
The attack by Hamas militants on Israel, and the Netanyahu government’s declaration of war, brings renewed turmoil to the Middle East, threatening regional political and economic stability. In this special online briefing, economists from our Macro and …
The attack by Hamas on Israel on Saturday has led to widespread casualties and deaths, and the declaration of war by Israel’s prime minister. From an economic perspective, the experience from the 2014 Gaza war suggests that the effects on Israel’s economy …
A strong September headline payrolls number whipsawed global bond markets on Friday but the net result was that yields ended the week at post-GFC highs. According to the financial commentariat, this is all part of the pain of adjusting to a “higher for …
This page has been updated with additional analysis since first publication. Weakness in German industry to continue The further drop in German industrial production in August was better than it looked as it was driven by volatile components. However, it …
Our latest Chart Pack on Japan's economy is embedded below. With the economy growing at an above-trend pace, the labour market should soon start to tighten again. There are mounting signs that a virtuous cycle between wages and prices is starting to form …
That September US payrolls report has triggered renewed selling in global bond markets. With yields threatening to hit fresh multi-year highs and investors scrambling for reasons behind the sell-off, Group Chief Economist Neil Shearing and Deputy Chief …
7th October 2023
Bond Market Sell-Off …
6th October 2023
The US stock market has rallied so far today and is on track to bring to an end a spell of weekly losses. Although we think that the proximate cause of this recent weakness – rising bond yields – has largely run its course, we don’t expect the fortunes of …
Remarkably, the dollar may be about the lose its record streak of weekly gains despite a strong US payrolls report . (See Chart 1.) While the initial reaction to today’s data was another jump in the greenback, it has since given back that gain, and those …
The further rise in home listings in September and likelihood that mortgage rates will increase amid the global bond market sell-off suggests that house prices will soon fall again. While employment rose strongly in September, the fall in hours worked …
Nigeria: labour strike averted at a cost Nigeria avoided a potentially disruptive workers’ strike this week after the government made a late offer of short term relief measures, but these risk adding to fiscal and inflationary pressures. Unions had called …
Feeling the spillovers… Latin America has been far from immune from spillovers from the sell-off in global bond markets. (For more on the impact on the global economy, see here .) Like in DMs, local currency bond yields in the region have risen sharply, …
Rising long rates a fiscal rather than monetary problem Surge in long yields not all due to higher for longer The conventional wisdom is that the recent surge in Treasury yields is a reaction to the Fed’s “higher for longer” message. But that surge has …
It has been a week of declines for most commodity prices, as commodities were caught up in the more widespread selling of financial assets. (See Chart 1.) Chart 1: S&P GSCI and US 10Y Treasury Yield Sources: Refinitiv, Capital Economics Crude oil prices …
Turkey: rebalancing now underway Data releases this week finally provided some signs that Turkey’s inflation and current account problems are starting to ease. Admittedly, inflation continued to rise in September, to 61.5% y/y, from 58.9% in August. But …
The recent rise in gilt yields has been almost as fast as the political furore over the cancellation of the northern leg of HS2 this week. The 30-year gilt yield rose from 4.68% at the start of last week to a 20-year high of 5.06% at the time of writing …
We expect the euro-zone economy to struggle over the next 18 months, and a mild recession in the coming quarters looks more likely than not. Headline and core inflation should keep falling, but the labour market will remain tight, keeping wage growth …
Wage pressures easing This page has been updated with additional analysis since first publication. The strong headline employment gain in September was entirely due to a rebound in educational services employment, with employment elsewhere edging down. …
Despite strong payrolls, wage growth continues to slow The surprisingly strong 336,000 increase in non-farm payrolls in September adds to the evidence on real activity that the economy is holding up well despite the headwind from higher interest rates. …
What to make of the bond market sell-off? We have covered the implications of the bond sell-off for the global economy here . Three additional points are worth making in relation to the euro-zone. First, the increase in yields and associated tightening of …
Limited macro fallout from weakening rupee The sell-off in global bond markets has caused currencies, including the rupee, to come under pressure this week. The rupee is now at 83.2/$, hovering close to record lows. It could even have posted new lows but, …
PBOC not letting its guard down The yield on 10-year US Treasuries surged to a 16-year high this week. We covered the potential implications for the global economy here . But one of the more immediate consequences has been downward pressure on many EM …
Becoming liable for the EU’s carbon border adjustment mechanism (CBAM) would nullify any cost-reduction benefit from a lower carbon price for UK companies that trade closely with the EU. That said, the CBAM would have less impact on domestically-focused …
The government bond sell-off over the past three months raises uncomfortable questions around the risks of financial instability and the outlook for fiscal policy. This note takes stock of what has driven the rise in long-term sovereign bond yields and …
Singapore’s struggling economy Singapore’s economy has struggled in recent quarters, and only narrowly avoided falling into recession in Q2. Preliminary GDP figures to be published on Friday are likely to show the weakness continued in the third …
The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone despite the recent easing in inflation. Indeed, it even raised the possibility of open-market bond sales to drain excess liquidity. There is a significant …
Near-term momentum in house prices is downwards The sixth consecutive monthly decline in the Halifax House Price Index in September leaves it significantly more downbeat than the Nationwide figures about near-term momentum in house prices. Given the …
RBI stands firm in fight against inflation The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone despite the recent easing in headline inflation. There is still a significant risk of the easing cycle that we …
One more hike for good measure On Tuesday new RBA Governor Michele Bullock began her tenure not with a bang but with a whimper, by leaving the cash rate unchanged at 4.10%. What’s more, the statement accompanying the policy decision gave few indications …
Bond market sell-off pushes yen to one-year low The big event this week was the sharp fall in the yen after it breached 150 against the dollar while Tokyo was asleep in the early hours of Wednesday. Government officials have refused to comment on …
