Global bonds are doomed to keep falling unless a sustained slump in equities revives the appeal of fixed-income assets, according to Barclays. “There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally,” analysts led by Ajay Rajadhyaksha wrote in a note. “In the short term, we can think of one scenario where bonds rally materially. If risk assets fall sharply in the coming weeks.
The US central bank is unlikely to ease up on its so-called quantitative tightening program, which makes it a net seller of Treasuries, according to the Barclays analysts. Additionally, the increase in bond supply due to the rising deficit is also driving up the term premium, they said. Demand will be weak as net buying by foreign central banks slows, the analysts wrote.