Subscribe The larger message from Goldman’s George Cole is that the bond market is not waiting for a hidden technical problem to be uncovered. It is repricing a world in which inflation has more than one route back into the room, fiscal supply is no longer background noise, and central banks have less freedom to look through energy shocks. T akeaways by Dark Side of the Boom™ The orderly rise in yields and muted rate volatility support Goldman’s view that fundamentals, rather than forced selling, are driving the global bond repricing. The US front end has regained control of Treasury curve behaviour, making next week’s inflation data the decisive input into September Fed pricing. European rates remain hostage to natural gas, but Bunds appear better insulated than Gilts, where the energy shock hits both monetary and fiscal policy. Japan’s curve is undergoing a genuine regime change as higher front-end rates increasingly flatten rather than steepen the JGB curve. Oil Keeps the Bond Rally on a Short Leash Global bond yields remain parked near their recent highs, and the absence of a volatility flare tells George Cole something important. This does not look like a technical accident, a leverage flush or a disorderly dash for the exit. The market is simply demanding a higher price to own duration. Oil is keeping inflation risk warm, growth continues to refuse the recession script, governments are issuing heavily, and the AI investment boom is adding another industrial-scale borrower to an already crowded bond market. Until one of those pillars weakens, rallies are likely to remain tactical rather than transformative. The Fed has at least restored some order to the US curve. After the confusion surrounding the July FOMC, Jackson Hole, and the subsequent run of Fed commentary, the front end is back behind the wheel. Two-year yields are once again leading both rallies and selloffs, while longer-term forwards have started to behave with less drama.Read More
Global Rates: Oil Keeps the Bond Rally on a Short Leash
