Global Bonds: Selloff deepens with rising term premia – BBH

Brown Brothers Harriman’s Elias Haddad highlights a deepening global bond market selloff driven by tighter expected policy paths and rising real term premia. Citing Bank of International Settlement (BIS) analysis, BBH points to crowding-out effects from large tech bond issuance and sovereign debt sustainability concerns.

Higher yields reflect policy and premia

"The global bond market selloff deepened. The upward trend in longer term bond yields is driven by a tighter expected policy path and rising real term premia – the compensation that investors require to hold longer-term bonds – with long-run inflation expectations still well anchored."

"The BIS points out the rise in real term premia is likely influenced by possible crowding-out effects due to the increasing bond issuance of large tech firms and concerns over sovereign debt sustainability. France’s plans to raise bond issuance to a record amount next year highlight the broader challenge for heavily indebted governments as higher debt servicing costs add to fiscal pressure."