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Macro Charts

Central banks not running to the rescue yet (but they will)

The major central banks have noted the increased uncertainty brought by the virus, but do not appear close to adding more stimulus. 

At the same time, the US labour market has held up rather well despite the slowing economy. Against this background, expected the Fed to commit to a rate cut by mid-year, as we do expect the US economy to slow down further and also weaken the labor market. Do not expect more easing measures from the ECB.

The market is already clearly pricing in a risk of further easing measures, but the central banks appear reluctant to deliver easing at least in the near term, which should limit further downside for bond yields.

At the same time, the lingering uncertainty coupled with weaker economic data should keep bonds supported and yields low at least until the summer. We have to remind that the second half of the year will bring new sources of uncertainty, including the US elections and new Brexit deadlines, so we are not holding our breath for much higher rates in the second half of the year either.

We do expect the global economy to do better in 2021, and the bulk of the increase we see in bond yields takes place only in 2021. Still, we expect yields to remain very low compared to history throughout our forecast horizon, and any increase is set to be relatively modest.

Financial markets already pricing in further central bank stimulus

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