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Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

World bond yields exhale

Perspectives

World bond yields exhale

Steven Wieting

By Steven Wieting

Chief Investment Strategist and Chief Economist

October 24, 2016Posted InInvestment Strategy, Investments and Fixed Income

A long trend of declining bond yields has been arrested amid considerable new uncertainties over the tactics of the European Central Bank (ECB) and Federal Reserve (Fed). While headline inflation has started to rise with the oil price recovery, we expect central banks to respond very cautiously to this development and continue efforts to sustain economic recovery. As such, we expect the rebound in developed market (DM) bond yields to be rather limited. While emerging market (EM) and petrol-linked markets have rebounded sharply and may be subject to downward corrections, we see these assets as well positioned for longer-term, if more gradual, appreciation.

On 20 October, the ECB left significant uncertainty over the pace of its asset purchases, but did note that an “abrupt ending” to quantitative easing was unlikely. The Fed appears to be pushing ahead with modest tightening steps. A US rate hike is most likely in December, but early November cannot be ruled out despite the historical precedent of it avoiding moves close to US elections. The timing of both the Fed’s first hike in a year and the ECB’s key policy update in December suggests the risk of a repeat of the turmoil seen at the start of this year, albeit a milder one.

We would expect far less impact from further hikes by the Fed, given the less vulnerable backdrop for global oil producers and the Fed’s signals that it no longer expects to tighten policy by so much. The 0.5% rise in the Federal funds rate it has pencilled in for 2017 is unlikely to be highly disruptive for EMs. The Fed has also conditioned markets to expect that monetary tightening will only proceed if the US recovery remains on track.

Nonetheless, the rise in the bond yields of the lowest-yielding sovereigns has impacted all global markets amid historically high correlations. Foreign exchange hedging costs have risen sharply, perhaps also contributing to reduced transmission of easing by the ECB and Bank of Japan in global asset prices. Equities in sectors such as high-yielding utilities and gold have fallen in value faced merely with mild bond market pressure. However, we continue to see more positive signs on the duration of the global economic recovery and see relative value in equities and credit versus most DM bonds.

Amid the rise in uncertainty over the monetary policy outlook, the Citi Private Bank Global Investment Committee left its asset allocation unchanged. This has halted declines in Developed Market (DM) bond yields. Global equities remain neutral with fixed income underweight by 1.0%. Cash and gold have small tactical overweights. Emerging market (EM) weightings are above DM weightings, particularly in fixed income assets.