Turbulent Bond Market Offers a Fleeting Glimpse of Cycle’s End

-- Bond traders got a glimpse this week of what the eventual end of the Federal Reserve’s hiking cycle may look like.Wider War in Middle East Could Tip the World Economy Into Recession

“It’s being in restrictive territory that matters,” Greg Peters, co-chief investment officer of PGIM Fixed Income, told Bloomberg Television Thursday. “The curve will continue to normalize. You’ll definitely see back-end rates moving higher, maybe there’s a little scope over the next 12 months for the front-end to move lower, but not a lot. I just think we have to move into this more normal environment.

Consumer price growth failed to moderate as much as economists estimated in September, Thursday’s data showed, while the separate inflation rate the Fed is trying to bring back to 2% quickened to 3.5% back in August. Expanded borrowing at a time of low unemployment “is a very worrying position and is really unusual at this stage of the cycle,” said Gene Tannuzzo, global head of fixed income at ColumbiaThreadneedle. He also is concerned about the potential for oil prices to keep upward pressure on inflation and long-term yields.

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