Bond Markets not in Panic Mode Despite Selloff

Dow Jones13:21

0521 GMT - Higher energy prices contributed to the recent bond selloff but the market isn't in panic mode, Allianz Research analysts say in a note. "Renewed tensions in the Middle East since July and destructions of refining capacity in Russia have raised energy costs in particular gas prices again, leading to higher inflation and central bank expectations (Federal Reserve terminal rate +35bp, European Central Bank +50bp) explaining the lion's share of rate increases," they say. While sovereign bond yields have risen since July, again reaching multi-year highs, the speed of increase was lower than after the start of the U.S.-Iran war, they say. "Bond markets are still functioning well according to bid-ask spreads or auction demand, but elevated rate levels are rightfully raising debt sustainability concerns."

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