Will inflation fears start to affect global markets?
*Wall Street Journal, by Mike Bird, October 27, 2016
”Investors worried for years about the prospect of deflation. Now another concern—inflation—is starting to rattle global markets.
Rich-country government-bond prices tumbled Thursday, sending yields on both sides of the Atlantic up to levels not seen since the U.K.’s vote to exit from the European Union in June.
In the U.S., the yield on the 10-year U.S. Treasury note surged to 1.843% Thursday, its highest level since June 1. Yields rise as bond prices fall. The German bund’s yield rose to 0.172%. And the 10-year U.K. gilt yield ended the day at 1.246%, up 0.087 percentage point, according to Tradeweb.
The rising yields are the latest sign investors are bracing for what could be a major shift across markets. In recent years, falling commodities, meager wage rises and insipid economic growth kept prices low and pushed investors into assets such as long-dated bonds and high-dividend-paying stocks, that typically do better during periods when inflation is muted.
Now inflation is ticking up again, and these markets are coming under pressure. Meanwhile, other investments, such as the cyclical stocks that prosper amid higher inflation, are expected to benefit.”
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