JGB market outlook July, 2022

Europe:  although there’s pressure on the growth of earnings yield as yet, but tug of war over price increase and economic slowdown is continue.

  Will the yield on U.S. 10-year-bond continue to rise (the earnings yield is increasing)? We can see that U.S. consumer prices accelerated in May by the date released in early June. And the surveys of consumers report provided by the University of Michigan in June shows that a measure of the average expected inflation will increase over the next five-year. Based on the above, on the FOMC held in June 14 and 15 had decided to raise interest rates by 0.75%.   Considering about the sharp increase in interest rate, although U.S. 10-year-bond yield increased sharply to 3.49%, but due to FOMC keep a 0.5% rate hike in July and the recession fears stocked by US economy has increased as well, the growth shrank late in June. Based on the outlook from the participants who has joined FOMC, the terminal rate of this time will be 3.75%, there’s still space to rise. The recession fears is the major reason for controlling the increase of yield,