Capital Economics: Bond Market Outlook Improves

According to Jin10, Capital Economics Asia-Pacific markets head Thomas Matthews said in a report that a less hawkish-than-expected monetary policy stance and the bursting of an artificial intelligence bubble would further support bond markets over time. Matthews said bond markets extended their rally last week after major central banks kept interest rates unchanged as expected, doing little to dampen market optimism. He said central banks would continue to provide a favorable environment for the rally. The Federal Reserve, European Central Bank and Bank of Japan may raise rates soon, while the Bank of England and Reserve Bank of Australia are likely to do so this week. Matthews added that the inflation outlook in developed markets does not justify the scale of rate hikes implied by money-market pricing, a point he said the firm had emphasized repeatedly.