JPMorgan Private Bank’s executive director and global market strategist Julia Wang says rising bond yields, as well as a little more inflation at this point in the economic cycle, are ‘healthy signs’ as the global economy is recovering from the COVID-19 pandemic.
The yield on the benchmark 10-year Treasury note saw a rapid rise to levels not common before the worst of the pandemic struck. When the yields rise, bond prices fall. The rise in yields comes amid optimism about the recovery of the global economy and as the vaccination campaigns in the large economies continue. Also, global governments have been very active and bold in supporting their economies, building a bridge to get customers, corporates, and small businesses on the same platform.
The global economy is rising and the phase of this cyclical recovery and rising bond yields is the direct reflection of the growing optimism. Much of that optimism may go in favor of Asian economies this year, which is experiencing a strong growth momentum. The US government has increased the spending and President Joe Biden’s $1.9 trillion stimulus package can turn out to be fruitful for the Asian exporters. The increased in the export will narrow down the current deficit in Asian economies such as China, India, and South Korea.
Typically, a steepening curve is seen as a good sign for the market, corporate houses, and stock market. A steepening yield curve comes when the yield of long-dated Treasury notes rises more than the short-dated notes. In the current situation, changes in Bond yield are not a treat if we look at the real drivers behind it. This curve will prove to be the positive wind in the Asian market because of the fallout from the US fiscal policy.
