Franklin Templeton Warns Food Inflation Could Pressure Global Bond Markets

Franklin Templeton said food inflation next year could lift overall inflation by about 1 percentage point versus current market expectations, prolong price pressures, and weigh on government bond performance. According to Sina Finance, Franklin Templeton global investment strategist Michael Brown said food inflation is likely to emerge next year, but the market is not paying attention to it now. Brown said drought-related crop losses are one driver of higher food prices, while poultry farming and other food production costs remain heavily influenced by energy prices. The firm said this is a global risk. It also said recent weakness in U.S., European, and British bonds stems from investors increasingly pricing in stronger-than-expected growth and stickier inflation. Franklin Templeton said the bond market is in a bear steepening phase, with long-end yields expected to stabilize around mid-next year while short-end yields continue to rise. In that environment, Brown said he prefers corporate bonds over sovereign debt and also favors value stocks such as oil, banks, and metals.