An increasingly fragile ceasefire between the US and Iran is returning the bond market’s focus to inflation and reinforcing expectations that interest rates will stay higher for longer.
Risk that higher energy costs will add to already elevated price pressures, delaying Federal Reserve rate cuts, is front of mind for investors in the $31 trillion Treasuries complex after talks ended without a peace agreement. Traders and strategists at Pacific Investment Management Co., Brandywine Global Investment Management, and Natixis North America are bracing for yields to remain elevated — and many are reluctant to make big shifts in their allocations until there is greater clarity on the inflation outlook.
