CENTRAL BANKS PUSH BACK ON RISING YIELDS Global bond yields soared over the past week, with US 10-year Treasury yields peaking above 1.60% and their UK counterparts above 0.80%. In Australia, 10-year government bond yields climbed to near 2% (Chart 1). To the extent that the increases represent expectations of economic recovery, they should in principle be welcomed by central banks. That appeared to be one of the main messages from US Federal Reserve officials. Bank of Englan
Sterling surged past $1.40 for the first time in three years as investors bet on UK’s rapid vaccine rollout with help pave the way for a reopening of the economy this year | Fears have also been calmed that the Bank of England may take interest rates negative, even though the BoE has encouraged banks to prepare for such an eventuality | The UK downturn was also much milder than expected in February according to the latest PMIs .
EU usiness activity across the euro
MARKETS RESCUED BY CENTRAL BANKERS’ COMMENTS Financial market performance continues to reflect a positive view of future economic developments. Most equity markets seem set to end the w eek up again although the gains are more modest than in the first w eek of February. Credit markets similarly remain buoyant. Government bond market yields are mostly little changed on the w eek. In at least some cases, notably the UK and the US, medium to longer dated yields are some way abov