Interest rate outlook: Long-term US rates now more dependent on global monetary policy

Invesco Fixed Income shares its views of rates around the world

US: We expect solid US economic growth to continue, and we believe inflation is likely to remain low for the next several months before moving higher in 2018. This does not affect our forecast for the US Federal Reserve (Fed) to begin tapering its reinvestment program in September. However, inflation data will be critical in determining when the Fed raises the federal funds rate again. If inflation stays low, this may not occur until mid-2018. In our view, global monetary policy will continue to be the main driver of long-term US rates, with tighter European Central Bank (ECB) policy and a rising global term premium likely to push them higher by the end of this year.

Europe: Economic growth in the eurozone has

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Interest rate outlook: US inflation data unlikely to deter Fed from September tapering

Invesco Fixed Income shares its views of rates around the world

US: May’s US inflation data surprised to the downside for the third month in a row. While we expect US growth to continue at a solid pace, inflation is likely to stay low for the next several months before moving higher in 2018. We do not expect the downside surprise in inflation to delay the beginning of the Federal Reserve (Fed) plan to begin reinvestment tapering in September. However, future inflation readings will be critical in determining when the Fed raises the federal funds rate again. If inflation stays low, this may not occur until the middle of 2018.

Europe: We remain

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Interest rate outlook: Eurozone economy now in “Goldilocks” phase

Invesco Fixed Income shares its views of rates around the world

Europe:

The risks around the French elections are now behind us, and we are unlikely to face a far right insurgency in the next electoral test: Germany. In the background, European data continue to be solid and resilient to political risks. Given the French election’s market-friendly outcome, we expect a renewed focus on fundamentals and European Central Bank (ECB) watching going forward. As post-election short covering winds down, we expect European core yields to resume their upward trend and peripheral spreads versus German bunds to widen again. The periphery could come under more pressure in the unlikely event that early elections are held in Italy.

US:

Stronger global growth is likely to be

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Interest rate outlook: European markets return to fundamentals

Invesco Fixed Income shares its views of rates around the world

Europe:

The risks around the French elections have decreased tremendously following the comfortable Macron victory in the May 7 election. At the same time, data out of Europe continue to be solid and resilient to political risks. Given the French election’s market-friendly outcome, we expect a renewed focus on fundamentals and European Central Bank (ECB) watching going forward. As post-election short covering winds down, we would expect European core yields to resume their upward trend and peripheral spreads versus German bunds to widen again.

US:

We are constructive on global growth and believe it will exceed market expectations. Although we expect

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Interest rate outlook: Global growth could push US yields higher

Invesco Fixed Income shares its views of rates around the world

Waldner_Rob_sm_150dpi_RGBAt Invesco Fixed Income, we believe strong global growth should ultimately pressure US interest rates upward as global monetary policy tightens. In the short term, however, the US Federal Reserve (Fed) has indicated that it does not intend to tighten interest rates quickly. Moves from other central banks, such as the European Central Bank (ECB), will likely drive price action in longer-dated US Treasuries, in our view. As global growth continues to improve, other global central banks’ actions may catalyze a move higher in US Treasury yields.

Below is an overview of the Invesco Fixed Income team’s outlook for interest rates in other key world economies:

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