Market outlook S2 2020 | Hyperactive bond buying by central banks

Part 4 : hyperactive bond buying by central banks

Monetary policy can be expected to remain accommodative for some time to come.  Fed Chair Jerome Powell’s statements have pushed expectations of higher interest rates out by over four years. In Europe, the ECB has, via its PEPP, undertaken to continue its sustained pace of asset purchases until the end of June 2021. In the United States, the Fed has not set a limit on its asset purchases.

While short-term rates are expected to remain low, a rise in long-term rates cannot be ruled out. The Fed’s policy shift sets a medium-term inflationary bias that the current yield curve does not yet reflect. Nevertheless, if rates were to move off course, the Fed could always resort to yield curve control, not unlike Japan.

As of : September 2020

In the corporate bond segment, collapsing sovereign rates have resulted in stubbornly high credit spreads. Central banks are now set to target credit conditions via their corporate bond purchases, which will serve to curb the risk of runaway spreads.

As of : September 2020

As of : September 2020

As of : September 2020


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The opinion expressed above is dated September 2020 and is liable to change. Latest available data is used.

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