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Turmoil in global sovereign bond markets is set to persist for another six months to a year as central banks carry on raising interest rates to bring down inflation, according to a Reuters poll of market strategists.
More than a year after inflation started to become a worry and a little over six months since the U.S. Federal Reserve finally made its first interest rate hike from near zero, there is scant sign of price growth becoming less of a threat.
Since the Fed first moved, bond markets have been subjected to high levels of volatility and deep sell-offs, jolting many bond investors out of their complacency.
The ICE BofAML U.S. Bond Market Option Volatility Estimate Index, which began rising late last year, hit its highest level since March 2020 last week. This trend of great uncertainty is set to continue.
More than 65 percent of bond strategists, 14 of 21, who answered an additional question in a Reuters Oct. 19-21 poll said the current turmoil in sovereign debt markets would persist for at least another six to 12 months, including one who said it would last one to two years. The remaining seven said less than six months.
“We’re probably in for at least another year of significant volatility in bond markets…(and) it could definitely be more,” said Elwin de Groot, head of macro strategy at Rabobank.
