Central bank targets for inflation may be met earlier than expected in some countries. This environment has led to an increase in government bond yields. We explain how it came about.
In the US bond market, the yield on two-year government bonds had risen above the yield on ten-year bonds, creating the rare situation of an inverse yield curve. This was last the case in 2007.
We have seen a number of trend reversals this year, one of them being the end of the negative growth surprises. The forecast of economic growth and inflation are currently not subject to downwards revisions any longer.