Rising Bond Yields are 'Healthy' for Economy - JP Morgan

February 24, 2021 6:48 AM EST

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Julia Wang, executive director and global market strategist at JP Morgan Private Bank, believes rising bond yields are positive signs for the economy in the context of a global economic recovery.

“If you think about rising bond yield(s) or stronger growth, or even a little bit more inflation at this point in the cycle — these are healthy signs,” she told CNBC.

“I think that the global economy is going through this cyclical recovery phase and a rising bond yield (is) very much a reflection ... of this growth optimism,” Wang added.

Investors have raised concerns that the rising bond yields are signaling a potential for tightening of policy sooner-than-expected.

“The supportive stance from policymakers will likely remain in place until the vaccines have paved a way to some return to normality,” said Shane Balkham, chief investment officer at Beaufort Investment, in a memo sent to clients.

“However, there will be a risk of another ‘taper tantrum’ similar to the one we witnessed in 2013, and this is our main focus for 2021.”

As expected, global equity markets reacted negatively to rising bond yields as higher yields offer an alternative to dividend yields.

“The odds of tapering are helped in the United States by better retail sales after four months of disappointment and the expectation of large issuance from the $1.9 trillion fiscal package,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

Still, Wang insists that rising yields are still not a threat.

“If you think about what’s the underlying driver of the yield curve steepening this time around, I think that at this point in time it’s still not a threat - but over time I think this growth (optimism) is actually a tailwind for Asia markets,” said Wang, before adding that there is a great optimism on strong growth potential in Asia.



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