Our Global Markets Overview provides a high level review and outlook each month for markets and economies.
Markets pricing a pessimistic growth outlook
Risky asset prices have increased significantly since July as policymaker actions have removed some of the impending risks to near term global economic growth. In particular, markets linked to European risks have moved to discount an improved growth environment or equivalently lower risk premia following moves from the European Central Bank, i.e. its commitment to buy periphery sovereign bonds.
Developed market bond yields have increased only modestly since July, continuing their range trading pattern of the last 12 months. Both nominal and inflation-linked curves have remained low in the last five months and have not moved to discount improved growth prospects, which is evidence of financial repression at work. Monetary stimulation by the major central banks are keeping yields close to their lower bounds and, for the moment at least, improving investors growth expectations are insufficient to offset this large-scale bond buying by officials.