Macro Insights Weekly - Rising yields the last hurrah of this cycle

9 October 2023


  • Markets' nerves are being tested by large supply of US bonds in the pipeline, chronic dysfunctionality at US Congress, and a further entrenchment of the Fed's "high for long" narrative.
  • In the interim, data on wage growth and inflation have been moderating.
  • But the rise in long-term yields marks a tightening of monetary conditions not seen since 2008.
  • The saving grace is that tightening so far has not caused any financial stability concerns yet.
  • 2.5% real rate is not sustainable, in our view.
  • A major asset market correction could be coming, or rebounding inflation will push down real rates.