Nov 25 (Reuters) – World bond yields will doubtless fall barely in 2023 because the stability between demand and provide will enhance by $1 trillion, strategists at J.P. Morgan mentioned in a observe.
There might be a $700 billion contraction in world bond demand subsequent yr in comparison with 2022, whereas bond provide will doubtless drop by $1.6 trillion, J.P. Morgan strategists, led by Nikolaos Panigirtzoglou, estimated within the observe issued on Thursday.
“Based mostly on the historic relationship between annual modifications in extra provide and the World Mixture bond index yield, a $1 trillion enchancment within the demand/provide stability would suggest downward stress on World Mixture yields of round 40 foundation factors,” the Wall Avenue financial institution mentioned.
J.P. Morgan mentioned that whereas main central banks trimming their stability sheets in 2022 was the only largest contributor to deterioration in bond demand, sell-offs by industrial banks and retail traders had been additionally a lot larger than estimates.
This yr was one of many worst for bonds in historical past. Whereas short-dated U.S. Treasury losses had been restricted to lower than 10%, the 23% drop in annual returns of the 10-year U.S. Treasuries by final month was – in keeping with Financial institution of America – the worst because the turbulent infancy of 1788. learn extra
Reporting by Aniruddha Ghosh in Bengaluru; Modifying by Savio D’Souza
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