Market and views

Bond Market Outlook - Q2 2010

• Bond markets are supported by massive liquidity in the banking system, low rates and a steep curve.
• However, cyclical forces (economic recovery) and a lack of any fiscal restraint will provide headwinds.
• Inflation is not likely to worry central banks until the second half of this year or even later.
• The funding and credit worthiness of the US Government is a potential issue.
• We expect 10 year yields to rise in Q2 as central banks are perceived to be ‘behind the curve’.