Halfway through the year, bond markets are contending with the twists and turns of war in Iran, shifting labour market dynamics and heightened risks to economic growth.
“Bond markets have been influenced by the inflationary impact of higher energy prices,” says Chitrang Purani, fixed income portfolio manager. "But I’m increasingly concerned about how the war could weigh on economic growth as certain consumers have little buffer to absorb another inflation spike.”
While bond returns this year have been muted, this view suggests that ample starting yields could lead to a stronger second half as elevated rates either persist or drift down to boost total returns.
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