The global bond market enjoyed a powerful rally on Wednesday as investors bet that Christine Lagarde』s nomination to be the next president of the European Central Bank will extend an era of ultra-loose monetary policy in the eurozone.
Bond prices have been on a tear since late last year as, one by one, central banks have indicated concern about the global economy and switched to a more dovish stance.
Outgoing ECB boss Mario Draghi is readying interest rate cuts and a revival of the bank』s bond-buying quantitative easing programme, while the US Federal Reserve is also set to trim rates this summer, at least according to derivatives traders.
即將離任的歐洲央行掌門人馬里奧•德拉吉(Mario Draghi)正準備降息並重啟該央行買入債券的量化寬鬆計劃，而美聯儲(Federal Reserve)也將在今夏降息——至少衍生品交易員們是這麼認為的。
Ms Lagarde』s appointment, which has to be rubber-stamped by the European Parliament, is expected to bring more of the same accommodative monetary policy.
「Markets are unfamiliar with her academic monetary leanings,」 said Seema Shah, chief strategist at Principal Global Investors. 「Yet, going by her previous support of Draghi』s decisions to introduce innovative monetary policies, they are making the safe assumption that she is in the dovish camp.」
「市場不熟悉她的貨幣政策理念傾向，」Principal Global Investors的首席策略師Seema Shah表示。「然而，根據她之前支持德拉吉推出創新貨幣政策的決策，市場對於她屬於鴿派陣營的假設是靠譜的。」
European bond yields, which move inversely to prices, fell deeper into negative territory on Wednesday morning. The yield on Germany』s 10-year bond, which serves as a benchmark for the region, hit a record low of minus 0.397 per cent, just a whisker above the ECB』s deposit rate of minus 0.4 per cent. France』s 10-year yield sank further below zero, touching minus 0.09 per cent. Two-year yields across the entire eurozone are now sub-zero.
Italian bonds were the strongest in the pack, boosted further by news that the populist government has avoided censure from the EU over its newly revised spending plans. Ten-year Italian government debt yields have sunk to just under 1.7 per cent, the bonds』 strongest level since the government was formed last year.
Emerging market bonds also enjoyed a Wednesday bounce.
A powerful rally was already under way across the Atlantic, where the yield on the 10-year US Treasury hit a fresh two-and-a-half-year low of 1.94 per cent on Wednesday. Recent data from the world』s largest economy has been mixed and the latest set of figures were disappointing: US private sector hiring failed to pick up as much as hoped in June, and economic activity in the service sector cooled to its lowest level in two years, according to separate reports released on Wednesday.
The 10-year Treasury is most sensitive to investors』 view of the long-term economic outlook. The yield on two-year Treasuries, which is more sensitive to Federal Reserve monetary policy, was little changed on Wednesday, having already priced in imminent rate cuts.
US President Donald Trump』s two nominees for the board of the Fed, announced late on Tuesday, are seen to be in the dovish camp. Judy Shelton, a former adviser to Mr Trump, last month told the Washington Post she thought interest rates should be cut 「as fast as possible」. The second nominee, Christopher Waller, has worked under James Bullard at the Federal Reserve Bank of St Louis, who was the only member of the Fed』s rate-setting committee who called for an immediate rate cut at its most recent meeting.
美國總統唐納德•特朗普(Donald Trump)在周二晚些時候宣布的兩位美聯儲董事會候選人被視為屬於鴿派陣營。特朗普前顧問朱迪•謝爾頓(Judy Shelton)上月告訴《華盛頓郵報》(Washington Post)，她認為應該「儘快」降息。第二位被提名人克里斯托弗•沃勒(Christopher Waller)此前在聖路易斯聯儲(St Louis Fed)行長詹姆斯•布拉德(James Bullard)手下工作，而後者是美聯儲利率制定委員會中唯一在最近一次會議上呼籲立即降息的成員。
Markets are now convinced that looser monetary policy is on the way from several central banks, an assumption that has added fuel to a broad-based fixed income rally in 2019 and pushed the average yield of $57tn of global bonds down to just 1.67 per cent.