No threat yet to global profits

There has been widespread fears that the decline in government bond yields this spring is signaling that the global economy is headed south. We disagree. The decline in yields reflects a number of factors, from falling inflation expectations, increased odds of more reflation from the ECB and the Fed’s signaling that it will leave policy rates below their equilibrium level once it finally gets around to raising interest rates. These factors have pushed government bonds into expensive territory.

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