Please see below article received from Brooks Macdonald this morning, which provides a global market update.
What has happened
Yesterday saw more pressure heaped on global government bond markets, with bond yields rising and bond prices falling. In the US, the 20-year Treasury yield traded above 5% intraday for the first time since November 2023. Over in the UK, intraday the 10-year Gilt bond yield hit 4.79%, its highest level since 2008, along with the highest UK 30-year yield since 1998, at 5.35%. Even in Japan, which had previously been the last hold-out on ultra-low interest rates, the 10-year JGB bond yield at 1.17% earlier this morning is around its highest levels since 2011. Looking to the day ahead, US stock markets will be closed today to mark a national day of mourning for former US President Jimmy Carter, while the US bond market will shut early at 2 pm New York time.
US Federal Reserve meeting minutes
Yesterday saw the minutes from the US Federal Reserve’s latest (December) meeting published. Of note, US central bank officials were said to be taking a “careful approach” to any future interest rate cuts given the risks around inflation. In particular, the minutes noted that “almost all participants judged that upside risks to the inflation outlook had increased”, due to “recent stronger-than-expected readings on inflation and the likely effects of potential changes [under President-elect Trump] in trade and immigration policy”.
US debt issuance tests markets
Higher US government bond yields this week have been strained further by the size of US Treasury issuance. There has been some US$119bn worth of government debt issued this week already, in addition to heavy corporate bond issuance as well. That has led investors to demand higher yields, in part reflecting higher risk premiums for holding longer-dated debt in particular.
What does Brooks Macdonald think
It seems global bond markets have kicked off 2025 with a bit of a bang, with bond yields in the UK and abroad rising across their maturity curves – although there has been some ‘buying-the-dip’ in US bond markets overnight. To a degree, equity markets can cope with higher bond yields if the broader economic picture remains constructive. The risk is that if bond yields continue to drive higher, and stay there, should the inflation/economic growth mix deteriorate this could start to weigh on economic activity and cause a reassessment of risk across asset classes.
Index | 1 Day | 1 Week | 1 Month | YTD | |
TR | TR | TR | TR | ||
MSCI AC World GBP | 1.1% | 1.9% | -0.1% | 1.9% | |
MSCI UK GBP | 0.1% | 1.0% | -0.5% | 1.0% | |
MSCI USA GBP | 1.4% | 2.0% | 0.0% | 2.0% | |
MSCI EMU GBP | 0.3% | 2.5% | 0.8% | 2.5% | |
MSCI AC Asia Pacific ex Japan GBP | 0.7% | 1.1% | 0.0% | 1.1% | |
MSCI Japan GBP | 0.3% | 0.2% | -0.5% | 0.2% | |
MSCI Emerging Markets GBP | 0.4% | 0.8% | 0.1% | 0.8% | |
Bloomberg Sterling Gilts GBP | -0.9% | -1.7% | -3.9% | -1.7% | |
Bloomberg Sterling Corps GBP | -0.6% | -1.1% | -1.7% | -1.1% | |
WTI Oil GBP | 0.0% | 3.7% | 12.5% | 3.7% | |
Dollar per Sterling | -0.9% | -1.2% | -3.0% | -1.2% | |
Euro per Sterling | -0.7% | -0.9% | -0.6% | -0.9% | |
MSCI PIMFA Income GBP | 0.1% | 0.4% | -1.2% | 0.4% | |
MSCI PIMFA Balanced GBP | 0.3% | 0.7% | -0.9% | 0.7% | |
MSCI PIMFA Growth GBP | 0.6% | 1.2% | -0.5% | 1.2% | |
Index | 1 Day | 1 Week | 1 Month | YTD | |
TR | TR | TR | TR | ||
MSCI AC World USD | -0.1% | 0.6% | -3.1% | 0.6% | |
MSCI UK USD | -1.1% | -0.3% | -3.5% | -0.3% | |
MSCI USA USD | 0.2% | 0.7% | -3.0% | 0.7% | |
MSCI EMU USD | -0.9% | 1.2% | -2.3% | 1.2% | |
MSCI AC Asia Pacific ex Japan USD | -0.6% | -0.2% | -3.0% | -0.2% | |
MSCI Japan USD | -0.9% | -1.1% | -3.5% | -1.1% | |
MSCI Emerging Markets USD | -0.9% | -0.5% | -2.9% | -0.5% | |
Bloomberg Sterling Gilts USD | -2.1% | -3.2% | -6.9% | -3.2% | |
Bloomberg Sterling Corps USD | -1.9% | -2.5% | -4.8% | -2.5% | |
WTI Oil USD | -1.3% | 2.2% | 9.1% | 2.2% | |
Dollar per Sterling | -0.9% | -1.2% | -3.0% | -1.2% | |
Euro per Sterling | -0.7% | -0.9% | -0.6% | -0.9% | |
MSCI PIMFA Income USD | -1.1% | -0.9% | -4.1% | -0.9% | |
MSCI PIMFA Balanced USD | -0.9% | -0.6% | -3.9% | -0.6% | |
MSCI PIMFA Growth USD | -0.6% | -0.1% | -3.5% | -0.1% | |
Bloomberg as at 09/01/2025. TR denotes Net Total Return.
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Chloe
09/01/2025