Bond price volatility spikes as Fed, central banks expected to cut rates

London

GLOOMY investors are buying low-yielding bonds as they fear that the United States and global economies are slowing.

Bond price volatility and gold prices have risen as bond market participants expect the US Federal Reserve and other central banks to slash rates to counter a potential recession.

A key indicator that economists are observing is the relationship between short-term and long-term interest rates. Currently, three- and six-month US treasury yields are 0.09 per cent higher than the 2.10 per cent yields of treasury bonds that are to be redeemed in 10 years, that is, 2029.

In bond market jargon, this is an inverted yield curve. Normally, the yield curve slopes upwards - that is, yields of bonds due to be repaid in say …