After GDP growth for Q1 2014 in the US was initially published as being practically zero, statistics have been released confirming therebound during the spring months. In April, the ISM Purchasing Managers’ Indices (PMI) extended their uptrend, 288,000 jobs were created and the housing market picked up. Economists are looking for GDP growth in the region of 3% for Q2. Inflation moved within touching distance of the US Federal Reserve’s target as the y-o-y headline rate quickened from 1.5% to 2%. In spite of all this, yields on 10-year US Treasury bonds extended their decline in May, dipping as low as 2.5% in mid month.
Eurozone GDP only expanded by 0.2% in Q1 2014, falling short of expectations which had been looking for 0.4% growth. This sluggishness tempered the optimistic view the eurozone had at long last shrugged off its troubles, delivering a reminder the recovery remains both brittleand fragmented. Moreover, the slowdown in Russia’s economy might well have knock-on effects throughout Europe, with some countries already feeling the pinch. Even though eurozone inflation did climb from 0.5% y-o-y to 0.7%, anxiety that disinflation might degenerate into deflation has not yet been dispelled. In early May, the ECB stuck with the status quo, but did hint fresh measures might well be adopted in the not too distant future.
Continue reading: Pictet Bond Letter - Juni 2014 (PDF)
The Pictet Bond Letter is Pictet's monthly comment on global bond markets. The report looks at recent developments and trends in bond markets and covers the main regions and sectors. It reflects the views and opinions of the over 40 specialists forming the fixed income team of Pictet Asset Management based in Geneva, London and Singapore.
