The volatility in global bond and equity markets is easing today after Fed Chair Jerome Powell's reassuring comments to the Senate Banking Committee yesterday. He signaled that the central bank is nowhere near pulling back its economic support measures, saying there was still a long way to go to reach their inflation and employment goals. Powell will give testimony to the House Financial Services Panel today.
The global bond market is suffering its worst start to a year since 2015 as investors grow increasingly confident that the rollout of Covid-19 vaccines will boost economic growth and fan serious inflationary pressures for the first time in decades. The Bloomberg Barclays Multiverse index tracking $70tn worth of debt has lost 1.9 per cent since the end of last year, in total return terms that account for price changes and interest payments. If sustained this would be the worst quarterly performance since mid-2018 and the sharpest first-quarter setback for the broad fixed income gauge in six years.
Continued fiscal and monetary support, coupled with the rapid rollout of vaccines, mean investors are increasingly confident in a strong economic recovery over the horizon. For the oil market this means forecasts of $100 a barrel crude are emerging, less than a year after the commodity traded in negative territory. Goldman Sachs Group Inc. strategists said that the recovery in demand will outpace supply when they increased their third-quarter forecast for the commodity to $75 a barrel.