Government Bonds Rally Around the World on Slowdown Concerns

Group 1 - Sovereign bonds globally rose as concerns over the Middle East conflict potentially derailing economic growth increased demand for government debt [1] - US Treasuries, along with UK and Japanese bonds, advanced due to speculation that rising oil prices may indicate a prolonged global fuel shortage [1] - The bond rally followed weeks of selling driven by surging oil costs and fears of central bank interest-rate hikes, with a shift in focus towards slowing economic growth easing inflation concerns [2] Group 2 - Yields on Treasury two-year notes fell six basis points to 3.85%, while benchmark 10-year debt yields dropped nearly 7 basis points to 4.36% [3] - Traders have unwound the pricing of US rate hikes for this year, with swaps for the December Fed meeting nearing zero, reflecting a significant change in market expectations [4] - UK and German 10-year yields fell around 5 basis points to 4.92% and 3.04% respectively, while Japanese equivalents declined one basis point to 2.36% [5] Group 3 - The bull-steepening trend in bonds is expected to continue as investors shift focus to growth slowdown concerns after previously pricing in inflation expectations due to the war [5] - Major bond funds in the US, including Pacific Investment Management Co., believe that financial markets are underestimating the risks of a sharp slowdown triggered by the Iran war [5] - Goldman Sachs has indicated that the probability of a downturn over the coming year has risen to about 30% [5]