Barclays analysts warned on Thursday of the challenging future facing global bonds unless there is a significant fall in share prices. They pointed to several factors contributing to this outlook, including the US central bank’s quantitative tightening program and rising deficits.
The analysts also noted Japanese investors’ shift towards domestic debt, following policy changes by the Bank of Japan. This shift, combined with weak demand from foreign central banks, further threatens the appeal of U.S. Treasuries.
According to the Barclays team, only a substantially lower repricing of risky assets can stabilize the bond market. They believe that the recent 5% drop in interest rates is insufficient to trigger a recovery in fixed income. The analysts argue that a larger decline in stock prices would be necessary to achieve stability in the bond market.
This analysis comes at a time when global financial markets are grappling with multiple challenges, including central bank policy shifts and economic uncertainties. As such, investors and market participants will likely be closely monitoring developments in both the stock and bond markets in the coming weeks and months.
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