Multi Asset chart of the week | Insight Investment

US and German government bond yield curves continue to steepen

Stephanie Chan, Portfolio Manager, said: “The government bond yield curves in both the US and Germany steepened to levels not seen since 2021 – this means that the yields of bonds with longer maturities (30-year, for example) have increased by more than the yields of bonds with shorter maturities (5-year, for example). Yield curves tend to steepen over the course of a normal business cycle; however, this recent steepening may also reflect the uncertain growth and policy backdrop. Investors concerned about growth are pricing in policy rate cuts from the Fed and ECB, thus keeping the shorter-end yields lower. At the same time, investors are expecting more government bond issuance to fund larger fiscal spend and expecting inflation to rise. The relatively lower demand for longer-maturity debt is continuing to push longer-end yields upward.”^†